Author: Jeff

Debit Card v. Credit Card-What’s Best for You?

You have two big options when it comes to the plastic card we all pull out of our wallets to pay for things. They all might have 16-digit card numbers and expiration dates, but one big difference relates to whether using it creates a loan or a direct withdrawal from your bank account.

Credit cards allow you to borrow money from the credit card company, up to a certain limit, to purchase items or pay for services. When you use a credit card you are getting an interest free 30-day loan from the credit card issuer. If you don’t pay it back in full by the next billing deadline, then interest begins to accumulate on the unpaid balance.

Debit cards allow you to spend money directly out of your bank account, and thus the transaction causes an immediate deduction to your bank balance. There is no borrowing involved when you use your debit card. If your bank account doesn’t immediately have funds to cover the transaction, either the purchase won’t go through, or you will be subject to overdraft fees on the account.

Which card type if best for you? It depends on what you deem to be important. Here are the factors:

1. If you want to build a credit history to enhance your credit report, then the credit card helps. On-time payments, low credit utilization ratios (i.e. relatively small purchases compared to your limit) help build your credit score…but the opposite is also true. If you are late on payments or max out the card frequently your credit score will take a hit. Debit cards have no effect on your credit score because they are direct payments from your bank account.
2. If you want guardrails for your spending, then a debit card is the way to go because you can only spend what’s in the account (or be subject to overdraft fees). Because it’s a loan, you don’t have to consider how much you have in the bank when you whip out a credit card. Some people get into financial trouble and high interest debt with a credit card. That’s difficult to do with a debit card.
3. If you want the option to dispute a purchase after the fact, the credit card wins. The Fair Credit Billing Act allows credit card users to dispute purchases through the credit card company. With a debit card, the money is out of your account by the time you put the debit card back in your wallet, and you have to get the merchant to reverse the transaction — Not so easy.
4. Fraud protection is important. Credit cards always had the advantage here, but more debit card companies are starting to add fraud protection, too. However, since a debit card is linked directly to your bank account, a fraudulent purchase can immediately drain your account while credit card fraud has no immediate impact on your bank account because you pay for it later.
5. Debit cards don’t have an annual fee while credit cards do. But credit cards offer cash back rewards while debit cards have much more limited cash benefits. This one’s a toss-up.

There is no right answer in the debit card vs. credit card debate. It all depends on what factors are most important to you. I hope the factors above help in deciding what’s best for you.

Fun Fact: Halloween pumpkins derived from Irish immigrants. Irish folklore includes the story of “Stingy Jack” who when he died was not allowed into Heaven or Hell and so he wanders the earth for eternity. To keep him away from their homes, people in Ireland would carve scary faces out of turnips to display. When Irish immigrants moved to America, they found pumpkins more prevalent and bigger to carve on, so they started using them to carve “jack-o’-lanterns” to ward off souls trapped between worlds as well as evil spirits.

All I See Is Gold

The words above are often attributed to Egyptologist Howard Carter when, on November 26, 1922, he first peered into the tomb of Tutankhamun. It’s not really what he said (see the Fun Fact below) but the phrase stuck because of our fascination with that mystical precious metal.

Gold has always been the talk of high society, but recently it has become the talk of the financial media, primarily because of the over 50% price run up this year to over $4,000 an ounce. You know things are getting wild when the Wall Street Journal writes about a California welder who has taken up prospecting for gold — complete with metal detector, pick and shovel.

Should you have gold as part of your investment strategy? There’s no simple answer. Although I do have an opinion that I will share. First, let’s be clear about some facts about gold:

1. Not all “gold” is the same. There are two categories: bullion and collectible coins. Bullion can be bars or coins, but the only value is in the gold itself as determined by its weight. Collectible coins can have a value over their weight in gold because of the history and rarity of a particular coin.
2. Actual physical gold is a pain in the neck to store and keep safe, for obvious reasons.
3. Physical gold is not so easy to turn into cash. You just can’t hand it to a banker and get paid the spot price (the current market price) in crisp new bills. You must go through a gold dealer, who will give you (sometimes much) less than the spot price because he or she needs to make a profit on the resale. In addition, physical gold appreciation can be taxed as a collectible at a 28% tax rate, which is higher than the typical 20% capital gains tax rate.
4. You don’t have to own physical gold to get some investment exposure. There are gold ETFs, which are investments that represent a specific amount of gold and the ETF fund itself stores and protects the physical gold. For those folks who want gold in their safe just in case Armageddon arrives, the ETF doesn’t cut mustard. If you’re just looking for a convenient way to get some gold investment exposure, then the ETF route can make sense.

Here’s my opinion on gold as part of your investment strategy. It’s hard for me to get my arms around calling gold an investment because it doesn’t produce anything. No profit sharing, no dividends, no interest. It just sits there, and when people find a reason to be more scared than usual (right now it’s the fear of the US dollar’s crumbling international reputation) than there’s a very human reaction to rush for gold, and thus demand peaks. When the crisis subsides, so does demand and thus the price of gold.

In fact, in the last 45 years, gold ($800/oz in 1980) has gone up 5X while the standard inflation measure has gone up 4.14X. Gold has barely risen faster than inflation, and if not for the huge run up in the last 10 months it would not have a stellar track record against inflation over the last 45 years. Stocks, as represented by the S&P 500 have gone up 62X during that same period. Is there really any question as to the better inflation hedge?

Let me conclude with a real-life scenario. My wife and I do own physical gold – 10 one oz coins that my father-in-law gave to us decades ago. I store them in a safe spot but still get nervous about them from time to time. I guess I can value them at $40,000 for the moment. I always joke that if the world goes crazy, I will cut each coin into quarters so we can buy food and gas–but I will likely never spend them. I don’t really need the value for support, and they have a sentimental value to my wife. We will probably give them to our kids or grandkids as gifts years from now…and then they will hold them for decades until they do the same. Gold…fun and interesting to hold? – definitely. An important part of your investment portfolio? – Not in my book.

Fun Fact: When British Egyptologist Howard Carter first opened King Tut’s tomb and pushed his candle inside his assistant asked, “Can you see anything?” Carter paused for a time to let his eyes adjust to the darkness and then said “Yes, wonderful things!” There was surely lots of gold, including a gold death mask currently valued at $2 million and a gold coffin valued at $1.7 million. The collection is insured for over $900 million dollars. Tutankhamun became king at age 9 and died at age 19.

Turns Out an Age-Old Investment Rule Is Just Plain Wrong

The biggest problems an investor faces are internal, not external. Your decision-making will have the biggest effect on your success over the long-term, regardless of what the market does. It’s been said human nature is a terrible investor. That’s because what we think is the natural choice often turns out to be the worst choice in the world of investment decisions.

For decades, many people who were trying to decide how much of their investments should be in stocks versus bonds/cash locked onto the “100 minus your age rule.” Simply put, the rule says subtract your current age from 100, and that’s how much should be in stocks. So, a 30-year-old should have 70% in stocks and a 70-year-old should have 30% in stocks. There are many reasons for the popularity of the rule, including that it is pretty simple to apply and it seems to jibe with human nature wherein the older we get the more conservative we should be in everything (think about that pool of water on the sidewalk that you use to run and jump over that you now walk around).

In recent years the “100 minus your age” rule was put through historical scenarios by some very well-respected financial analysts, including Bill Bengen, Wade Pfau and Michael Kitces. They all came to the same conclusion: Rather than decreasing your allocation of stocks as you age you should do the exact opposite and increase the allocation of stocks versus bonds each year of retirement. To be specific, you start retirement with a base stock allocation, let’s say 55% for example, and you increase that by one percentage point per year starting in year two of retirement. This technique is called the “increasing glide path” retirement planning.

While this might seem counterintuitive (good investing decisions often do) it really makes sense if you think about it. Your biggest challenge during your retirement years is not a volatile stock market. It’s inflation eating up your spending power, and stocks are the antidote to counter inflation. Between growth in stock prices and growth in dividends, stock values have risen faster than inflation for decades. Therefore, decreasing your allocation of stocks as you age is hampering the ultimate inflation slayer, and a bad idea. In addition, if it turns out that you had the bad luck of having a big stock market downturn early in your retirement, using the increasing glide path is in essence dollar cost averaging into a down market.

The proof is in the statistical pudding so to speak. Bill Bengen found that the increasing glide path approach increased the SAFEMAX withdrawal rate I wrote about last week from 4.68% to 4.84%. That is a substantial change and puts to bed the fallacy of the 100 minus your age rule.

Fun Fact: The oldest living verified person was Jean Calment of France who lived 122 years, 164 days. Currently, the oldest living person in the U.S. is Naomi Whitehead, who turned 115 last month.  I’m sure you wouldn’t have to convince either of them about the effects of inflation over their lifetimes.

Now, Let’s Talk About What You Really Can Spend in Retirement

Last week I wrote a piece about what current research shows people typically spend in retirement. Most people spend far less than they could. Over a 30-year period, people with a net worth of $560,000 or more could typically spend over $1 million more than they do and still never run out of money. I discussed several factors as to why this occurs, but the most important is simply not being educated on what a safe withdrawal rate looks like.

William P. Bengen is one of the fathers of safe withdrawal rates. His research over 20 years ago established what many call the “4% Rule” which in reality was the 4.15% rule– it just got rounded down to make it easier to remember. The purpose of the “4% Rule” was to establish a safe annual withdrawal rate that would assure retirees that they would never run out of money. Bengen tested 400 retirees (1926-1976) and found that the absolute worst performing retirement portfolio (for the person who retired in 1968) still lasted over 30 years using an initial 4.15% withdrawal rate.

Here’s the details of how it worked:

1. Add up all of your retirement accounts and then multiply the total by .0415 (4.15%) and that gives you the safe withdrawal amount for year 1 of retirement.
2. In subsequent years (Years 2-30, assuming a 30-year retirement) simply increase the dollar amount you withdraw each subsequent year by the inflation rate. For example: a $1 million investment portfolio would have a safe withdrawal amount in year 1 of $41,500. ($1 million x .0415). In year 2, assuming a 2.5% inflation rate, the safe withdrawal amount would be $42,538 ($41,500×1.025). In year 3, assuming a 2.75% inflation rate, the safe withdrawal amount would be $43,708 ($42,538 x 1.0275). Each year thereafter you check the annual inflation rate and apply the same formula.
3. For the original rule, Bengen relied upon an asset allocation of 60% stocks and 40% bonds, and only used two asset classes: “US Large-Company Stocks” and US Treasury Bonds.

I just finished Bengen’s new book A Richer Retirement, Supercharging the 4% Rule to Spend More and Enjoy More wherein Bill shows his new findings primarily based on the expansion of asset classes. He revisited safe withdrawal rates using equal investments in 5 equity classes: US Large Cap, US Small Cap, US Mid Cap, US Micro Cap and International stocks. For bonds, he used 5% US Treasury Bills and 40% Intermediate Government Bond Funds. Overall, he primarily tested an asset allocation of 55% stocks, 40% bonds and 5% cash.

The result of using a much more diversified portfolio and then retesting the withdrawal rates over 30 years is a new safe withdrawal rate (now called SAFEMAX) of 4.7%. There’s no change in the formula set forth above; just start with 4.7% instead of 4.15%. While that is a great starting point to see if you are on track to retire, you should also be aware of the following:

1. No one, not even William P. Bengen, can guarantee that what has worked in the past will continue to work in the future.
2. The SAFEMAX of 4.7% is based upon the absolute worst investing environment he tested. Most of the retiree time periods allowed for a greater “safe” withdrawal rate and the average SAFEMAX for all retirees studied was 7.1%. On average, even with the 4.7% withdrawal rate the average retiree will die still having about 5 times what they started with.
3. While not 100% guaranteed under the research a 5.25% withdrawal rate had a 95.7% success rate.
4. The SAFEMAX withdrawal rate does not factor in leaving a legacy to heirs or charities. Decrease the withdrawal slightly to do that.
5. Bengen’s website offers updates even to his recent book. On September 18, 2025, he updated the research to now recommend an allocation of 65% stocks, 30% bonds and 5% cash for higher upside potential.

As I mentioned last week, life was so much easier for retirees when they could just add up their guaranteed income from pensions and Social Security to figure out how much they could spend each month. Times have changed and now with large defined contribution plans like 401(k)s and 403(b)s, retirees must find a way to create their own “pension” to be added to their guaranteed income like Social Security.

The 4.7% rule is a good starting point. Figure out what your expected monthly expenses will be and then subtract Social Security and any pension income. Whatever you have left is what you are going to have to cover with your retirement nest egg and now you can apply the 4.7% rule to see where you stand.

Fun Fact: Michigan’s only bear is the black bear, which has a lifespan of about 10 years. Male black bears live in an area of about 100 square miles, females live in a 10-20 mile area. There are about 12,000 black bears in Michigan and the number is increasing annually. A male black bear can reach 500 lbs.

In Retirement: What You Can Spend vs. What You Will Spend

Most people spend all of their working lives saving and investing so they have a nice nest egg to withdraw from once their working days end. I’ll put together a synopsis on what you can safely withdraw in retirement in a future Up Early, but not until I finish the new book by Bill Bengen who originated the “4% rule” 20 years ago.

For now, let’s look at some interesting research on how much retirees feel comfortable withdrawing from their investments during retirement (i.e. what you will likely spend).  The findings might surprise you.

In December 2024, David Blanchett and Michael S. Finke published a paper entitled “Retirees Spend Lifetime Income, Not Savings”. Their findings are that retirees spend less than what was originally predicted, and likely, less than their parents. That makes sense for two reasons:

1. Earlier generations of workers had what are called defined benefit plans. Those are your good old-fashioned traditional pensions which are nearly extinct except for government employees at the federal and state levels. Under the traditional pension, the retiree knew exactly how much their monthly income would be and could spend 100% of it comfortably knowing that next month the same check would arrive again. Today’s workers rely on defined contribution plans, primarily consisting of 403(b)s, 401(k)s and IRAs. Under these current plans, there is no monthly check in retirement, and the retiree has to decide how much to withdraw from their accumulated retirement savings.
2. There are many unknowns that retirees must grapple with these days, including their lifespan, future Social Security earnings and stock market volatility. Those unknowns, combined with the lack of a set amount in a monthly check from a traditional pension all lead to the same result: retirees spend less than they could in retirement because of both fear of running out of money and lack of knowledge on safe withdrawal rates.

Blanchett and Finke’s article summarized the statistics supporting that finding as follows:

1. Retirees spend only around 50% of their savings over their lifetime.
2. Married 65-year-olds with at least $100,000 in assets typically withdraw just 2.1% per year from qualified and non-qualified investment accounts.
3. Over a 30-year period, retirees in the top 20% of net worth (currently approximately $560,000) could spend over $1 million more than they do and not come close to running out of money.

These findings are no surprise to me from my experience as a financial planner and also as a personal investor. It is very hard psychologically to shift from saving and investing to what’s called the “the decumulation phase” when you need to start liquidating investments and begin systematic withdrawals. For most people, this is why professional help is a must in retirement.

A good financial planner can give you confidence in many ways, including in your ability to safely withdraw more than you probably would otherwise take from your investments. That doesn’t mean that you must increase spending on “things”, but perhaps for example, it would allow you to make lifetime gifts to watch the enjoyment it brings to family members and yourself rather than waiting until your demise. Alternatively, getting a warm appreciative letter from a charity for a donation is a great feel-good moment. Perhaps a family trip to a special place is really within your budget!

Fun Fact: Did you ever wonder at what age people are the happiest? German and Swiss researchers studied over 460,000 people around the world and found age 70 to be the happiest age. I’ve seen other studies that differed from that finding. One had age 23 and a study at Harvard found 35 to be the happiest age. For me, I will keep abiding by the words of Jonathan Swift: “No wise man ever wished to be younger.” – Experience is the best teacher!

Understanding Personal Loans

One of my sons is going back to school full-time this month to get his MBA. While he did get a scholarship, it wasn’t for the full amount of tuition so…I put on my “Bank of Mom and Dad” hat and offered to help with a personal loan for the next two years of tuition. Borrowing from or loaning to family members can be complicated. Here are some rules and recommendations:

1. Most personal loans are “unsecured” which means all I’m relying on from my son is his promise to pay me back. If I said “I want the title to your car so that if you don’t pay I can sell it for what’s owed”, then we would have a loan “secured” by his automobile. If the security for a loan is real estate, then the loan is typically called a mortgage.
2. I’m going to write out the loan terms in a document that is called a “promissory note.” That’s just a personal loan written out and signed by the parties with a promise to repay. You can agree to some collateral in a promissory note, but it usually is unsecured.
3. Writing out the loan terms does several helpful things: 1. Memorializing the obligation helps to strengthen the obligation. Signing the document fortifies the seriousness of the commitment. 2. Memories can fade about the terms of the loan as years pass. The writing sets forth the exact terms and conditions from the start for future reference.
4. Loans and gifts are closely related, especially within families. Because there are limits on how much you can gift tax-free each year ($19,000 per person in 2025), the IRS is well aware that some folks try to use a “loan” to get around those limits. As a result, the IRS requires you to charge a minimum interest rate on the loan to show it’s legit. The minimum rate is called the Applicable Federal Rate (AFR) and can be found online. Determining the minimum rate depends on the length of the loan and how frequently you will be compounding the interest rate. My son’s loan will be a 10-year loan (he should be on sound financial ground by then), so currently I must charge him 4% interest under the IRS AFR tables.
5. Michigan, like most states, limits the amount of interest that can be charged on a loan. Laws limiting interest rates are called usury laws and in Michigan the limit is 25% annually. Unfortunately, there are lots of ways businesses can get around that limit and charge a higher rate, but you should stay within that boundary on any type of personal loan.

Now, despite being a lawyer I don’t have a heart of pure stone (close, but not pure). I may very well forgive the loan over the years and as long as I stay within the applicable gift tax exclusion, then there are no tax consequences. Heck, I even made him link one of my bank accounts to his university because if I pay the tuition directly then the $19,000 gift tax exclusion limit does not apply. I left all of my options open, and I told him I’m expecting first class treatment when I can’t get out of my rocking chair anymore. Things seemed so much easier when the only issue was what type of pizza to get for his soccer party sleep over. I guess I need to remind myself of something I tell clients all the time: Figuring out the best way to help out with tuition for an advanced degree for my son is a “good problem to have.”

Fun Fact: I was watching the Lions game this weekend with one of my sons and I complained about all of the downtime (mostly filled with commercials), so I looked it up: There are about 18 minutes of actual live gameplay during the typical NFL game that airs for over 3 hours from start to finish. I prefer to tape the games and run through all the downtime, and both of my sons remind me that’s proof of my old age (LOL).

Understanding the Word “Fiduciary”

I see the word “fiduciary” tossed around a lot these days. New clients sometimes ask if I’m a fiduciary. Yes indeed, as both a financial planner with a wealth management firm and an attorney. It is always good to ask, and the word fiduciary is important. However, you can’t just stop at the word itself.

By definition, a “fiduciary” is a person who holds a legal and/or ethical relationship of trust with one or more other parties. Fiduciaries are legally obligated to put the best interests of another person ahead of their own. A fiduciary obligation is created in many different settings. A trustee of a trust is a fiduciary to the trust beneficiaries. Corporate board members are fiduciaries to the shareholders of a company. Anyone who manages financial assets for the benefit of another person is a fiduciary, with the legal responsibility to look out for the best interests of that person.

But being a fiduciary and having integrity are not one and the same. A person can be in a fiduciary role but breach their fiduciary duty because they lack honesty and integrity. There are a myriad of examples of breach of fiduciary duty. Bernie Madoff, the infamous investment manager who swindled billions from his clients, was a fiduciary who breached his duty.

Some people working in the financial planning/investment industry take careful pains to make sure the word “fiduciary” shows up after their name. They hope that word will enhance their credibility, but credibility and integrity have very little to do with what title comes after a person’s name. As I often tell my clients and prospects when we discuss the term fiduciary, it really comes down to whether the person you are dealing with is at heart an honest and straightforward person. If they aren’t then having the word fiduciary after their name is meaningless.

Don’t stop at the word fiduciary. References and, most importantly, your personal experience with the person and their firm will go a long way to tell you if that person really takes their position as a fiduciary seriously. Start your investigation by looking at little things. Did the person follow-up on their promises? Did they get that piece of information to you, or schedule your follow-up appointment as timely as they said they would? As Albert Einstein said, “Whoever is careless with the truth in small matters cannot be trusted with important matters.”

It’s appropriate for you to ask someone if they are a fiduciary. It’s just as important to go beyond the answer to really explore what kind of person you’re dealing with.

Fun Fact: Yes, I know the Lions were not fun to watch last Sunday. But let’s remember that since 2004 five teams lost the first game of the season and went on to win the Super Bowl: New York Giants, Baltimore Ravens, New England Patriots, Los Angeles Rams, and Kansas City Chiefs. Now, let’s see how the next game goes.

Tech Scams to Watch For

This past Tuesday I was in my office just finishing an appointment when a text popped up on my phone indicating that my bitcoin withdrawal had been confirmed and that if I had any questions to click on the link in the text.  Hmmm. I didn’t make any withdrawal request on my bitcoin, so I immediately logged on using my normal method to check my balance and it was safe. A new and dangerous scam just crossed my iPhone. That led me to think about looking up the five most dangerous current tech scams going around. Here they are:

1. Employment scams. These are phony job sites or recruitment ads. Some are intended simply to get your personal information. They can either ask for that information as part of the job application, or sometimes they claim you have been offered a job and need to fill out personal information. Some scams involve giving a bonus for training purposes or supplies. The bonus check bounces but not before they request a payback because there was an overpayment.
2. Crypto currency scams. I started this Up Early with the one that just hit me. Bitcoin values have soared, so the scammers are particularly interested in crypto. These are very sophisticated scams which typically start with slowly building trust with the victim and then offering an investment opportunity with large returns. The victim is asked to invest their crypto and it’s a disaster.
3. Celebrity imposter scams. As ridiculous as it may sound, the most common scam in this way relates to scammers who find emotionally vulnerable victims and make them believe they are in a romantic relationship with a celebrity. The “celebrity” then requests money to start a new charity or for the down payment on a house for both the victim and the celebrity to live in.
4. Tech-support scams. This one hit my family about six months ago. A “new” window pops up and freezes the window you are in and requests you click on a button. It usually has a logo of Microsoft or Apple and a menu to eventually get you to someone who asks to be able to get into your computer to fix things. Some scammers simply try to sell useless software maintenance or warranty programs. Remember, no legitimate pop-up window will ever ask you to click on a link and no legitimate company will ask you for permission to get into your computer remotely.
5. Card-decline scams. This usually happens with an online purchase. The victim tries to make an online purchase and is told the card was declined when in reality the charge went through and so they try a second time and either receive a second charge or a much larger charge than the first one. The best protection here is to use a credit card rather than a debit card because a debit card is an instant withdrawal while the credit card can be monitored and the credit card company can decline the charge.

The technological breakthroughs in the last decade have made our lives easier, but also made scams much more prevalent and dangerous. AI-powered scams, including voice impersonation and video cloning are not far off. You may read one or more of the five scams above and think it will never happen to you. Think again, in a moment of weakness anyone can fall for something that in hindsight seems ridiculous. Also, you may have a loved one who doesn’t think clearly enough and can get scammed in these areas.

We should all take note of the last command that the referee will give to Canelo Alvarez and Terence Crawford right before their epic boxing match next week – “Protect yourself at all times.” (I just cannot wait for that fight!!).

Fun Fact: Well, here we are in September. Did you know it’s the only month that has the same number of letters in its name as its numerical order (nine).

Credit Card Debt After Death

Credit cards are important tools for daily and monthly expenses. When used correctly, they offer the credit card holder a 30-day interest free loan – you make a purchase on your credit card today, but you don’t have to pay the actual bill until you receive the next month’s statement. I wrote a piece about various creditor issues at death last April, but today I want to focus on what happens to outstanding credit card debt when you die. There are a few important factors to consider:

1. Was there a joint account holder? If so, a careful reading of the credit card agreement likely holds the surviving card holder responsible for the full debt.
2. Was there a probate estate opened? If there is no joint account holder, then the debt becomes the liability of the decedent’s probate estate. If probate is required at death, the appointed Personal Representative will be responsible for addressing all debts, including credit cards. Remember, probate is a court proceeding that can and should be avoided with proper planning.
3. Was probate avoided? Perhaps the decedent had a good estate plan and avoided probate through a combination of a trust and beneficiary designations. Without probate, the credit card company (or the debt collection agency that typically buys the debt) has less leverage to collect on the debt because there is no formal place to file the debt claim. Sometimes the fact that there is no probate results in the debt being dropped. Other times, the trustee of the trust can negotiate the debt down significantly because the only recourse the credit card company has is to open a probate estate on the decedent just to collect the debt—very costly.
4. Are family members on the hook for the debt? Generally, no, unless they co-signed for the debt or are joint owners on the credit card. There is no legal obligation simply because one is a spouse or child of the credit card holder.
5. What should I do if I’m handling the financial affairs of someone who dies with a credit card? Immediately contact the company so that they stop any future purchases that could be fraudulent. Proceed slowly and don’t feel obligated to give too much information. Remember, you might not have a complete financial picture of the decedent for several weeks. If you know that there will be no probate, tell them. If you aren’t sure if there will be a probate estate, let the credit card company know that too. Do not share any details of the decedent’s financials. The credit card company does not have a right to know that unless they actually sue for collection.

Credit cards make life easier. Hopefully, the information above will help to make credit cards easier after the death of the card holder, too.

If It Seems Too Good to Be True…

Boy, we are a really long way from this past April when the stock market was tanking and everyone was trying to remember what a tariff was and what possible harm it could do. The 12% drop in the S&P 500 in a single week following “Liberation Day” was nothing to sneeze at; and anything but liberating. Since those early spring woes, the S&P 500 has surged by approximately 20%, and the NASDAQ by about 28%, even with the pullbacks this week. How things can and do change.

Of course, it doesn’t matter if we are in a bear market or a bull market, there’s always room for fear. April’s fear was a big market drop. Here in August the fear is an overvalued market. Even though I am an experienced financial planner, I have the same emotional reactions that you have when I peek at my investment portfolio. Things seem…well…almost too good to be true.

With almost perfect timing, last Friday I stumbled upon an essay by the noted economist and author, Burton G. Malkiel. Best known (at least in my mind) for his must-read book A Random Walk Down Wall Street, which was published almost 50 years ago, Malkiel wrote a piece in the New York Times last week entitled “The Stock Market Is Getting Scary. Here’s What You Should Do.” It’s a great read if you wish to settle yourself down. I’ll save you some time and set forth the gems in the article:

1. There are several identifiable risks in the stock market currently, and probably as many unidentifiable risks. We also have serious budget issues that may not be getting the attention they should be. Despite these facts, Malkiel does not suggest slashing the amount of common stock you have in your portfolios. Making investment decisions based on guesses about whether stocks will go up or down in the short-term is a recipe for poor results.
2. Moving any money to cash based on current asset levels amounts to timing the market. To be a successful market timer, you have to make two correct decisions: First, when to get out, and second, when to get back in. Every study comes to the same conclusion: trying to time the market ultimately ends in poorer results than staying the course.
3. To provide perspective and reinforce the market timing point above, Malkiel reminds his readers that an investor who bought a US stock market index the day after Alan Greenspan coined the term “irrational exuberance” in December 1996 – a time of huge market valuations – earned an average rate of return of almost 10% per year over the next 20 years with dividends reinvested.
4. Whatever funds you have committed investment-wise to the long term should stay invested and ride out this “too good to be true” bull market rush. That said, you should focus on revisiting potential changes on any invested money that you will need relatively soon (e.g. in the next 2-3 years). Mikael recommends safe short-term bonds.
5. You should also make sure that your portfolio hasn’t become overweighted in stocks versus bonds simply from the market increase. For my clients, we rebalance according to objective asset allocation rules, so we never get too far out of balance. If you are not exposed to that type of service, then you may want to check your asset allocations because if they don’t match your risk tolerance you may not be able to stay disciplined during a substantial market correction.
6. Young investors should not blink an eye at this frothy market valuation. Keep pushing money into your investments and stay aggressive. The most powerful tool in your investment tool kit is time to ride out market volatility.

Many people think about being disciplined and staying the course when the market is down. These days you can see that the discipline applies on the other side of the spectrum when the market is making a large advance. Check your emergency funds. Check your asset allocation. Condition yourself for the inevitable market drop. But remember, over the long term it’s very hard not to grow your wealth with equities.

Fun Fact: I couldn’t help but smile at a great quote Malkiel referenced about all the worries that exist in our economy, politics, and world events. Despite all that, as Americans we do generally find a way to land on our feet and as the old saying attributed to Winston Churchill goes: “Americans can always be trusted to do the right thing once all other possibilities have been exhausted.”