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Liz Weston

Q&A: When should retirees stop actively investing?

March 2, 2020 By Liz Weston

Dear Liz: I am retired. My income is from a small pension, Social Security and dividends and interest from investments. I’ve made some bad investments, but I’m still earning a satisfactory return. Is there some kind of formula that I can use to determine whether I should sell a stock, take the loss and seek another investment or keep the stock, enjoy the dividend and worry the stock might drop further?

Answer: One approach is to ask yourself if you’d buy the same stock today. If not, then it may be time to sell these shares. Be sure to consult with a tax pro first because you may be able to use losses on one investment to offset taxable gains on another.

You also might ask yourself if it’s time to transition away from active investing and individual stocks. Most people aren’t able to buy the stock of enough companies to be truly diversified. Then there’s the daunting task of staying up to date on the fortunes and prospects of each company and industry. That’s way more work than most people can handle. Even if you’re up for the task now, you might not be in the future.

Also, most people don’t do well with active investing. Trying to figure out when to buy and sell for maximum gain usually results in excess trading costs that lower your returns. It’s also too tempting to hang on to a losing stock rather than admit you made a mistake, or to chase “hot” stocks that have already had their biggest gains.

A better approach would be a portfolio of mutual funds or exchange traded funds that’s regularly rebalanced, either by a financial advisor or a computer algorithm. If you opt for funds that mimic a market benchmark, you’ll be assured of matching the market and getting a better return than most active investors can achieve.

Filed Under: Investing, Q&A, Retirement Tagged With: Investing, q&a, Retirement

Q&A: Culture and parental advice

March 2, 2020 By Liz Weston

Dear Liz: You recently answered a question from a parent who wanted to know how to fix a financial issue in an adult child’s marriage. Your advice was basically to butt out. I think that may depend on culture. What if your advice saved your child’s marriage? What if it prevented your child from going into bankruptcy? Would it be worth the uncomfortable conversation? In some cultures, the approach is to butt in and confront the issue; if it causes problems, well then you deal with that also.

Answer: There may well be a culture in which the interference of in-laws is gladly received, rather than merely tolerated. There may even be people who enjoy being the target of unsolicited advice. It’s hard for some of us to imagine, but it’s certainly possible.

It’s probably safer to assume that your counsel is unwelcome and annoying unless it’s been specifically requested — and often even then.

Filed Under: Follow Up, Q&A Tagged With: follow up, parents and money, q&a

Q&A: Different approaches to marital finances

March 2, 2020 By Liz Weston

Dear Liz: Thank you for mentioning that many couples like to keep their finances entirely or mostly separate. Our solution was to create a joint bank account just for paying joint expenses, such as rent, food, entertainment together, vacations and so on. We each funded this account proportionately, based on our income (for example, the person earning 65% of the total income contributed 65% of the funds). Expenses, such as gifts to our separate children, entertainment on our own, car payments and all personal expenses were paid out of our own separate accounts. Each year at tax time, we’d revise the proportion of the joint account, if necessary, based on our separate tax return figures. It was so simple and tension-free. This was a second marriage for both of us, and we never had disagreements about money.

Answer: Congratulations for finding an approach that worked so well for both of you. As you demonstrate, there’s no one right way for couples to handle their money. Some prefer to have everything in joint accounts, others keep everything separate, and most are somewhere in between.

Filed Under: Couples & Money, Follow Up, Q&A Tagged With: couples and money, follow up, q&a

Friday’s need-to-know money news

February 28, 2020 By Liz Weston

Today’s top story: Concerned about Coronoavirus? How to prepare your house, mind and bank account. Also in the news: 3 ways Millennials are getting money right, what to buy (and skip) in March, and 6 moves to make if you’ve saved more than $1,000 in your checking account.

Concerned About Coronavirus? How to Prepare Your House, Mind and Bank Account
Practical steps.

3 Ways Millennials Are Getting Money Right
Forget the avocado toast trope.

What to Buy (and Skip) in March
Deep discounts on tax software.

If You’ve Saved More Than $1,000 in Your Checking Account, Make These 6 Moves
Don’t let it sit there.

Filed Under: Liz's Blog Tagged With: banking, checking accounts, Coronavirus, March shopping, millennials and money, money moves, tips

Thursday’s need-to-know money news

February 27, 2020 By Liz Weston

Today’s top story: When the market drops, play the long game with retirement savings. Also in the news: Is booking a last-minute spring break flight with miles a good idea, a credit union’s new card goes all-in with 3X points, and how to get a credit card when you’re already in debt.

When the Market Drops, Play the Long Game With Retirement Savings
Don’t panic.

Ask a Points Nerd: Should I Book Last-Minute Spring Break Flights With Miles?
The Points Nerd weighs in.

Credit Union’s New Card Goes All-In With 3X Points
A Florida credit union is about to get popular.

How to Get a Credit Card When You’re Already in Debt
When you need a little wiggle room.

Filed Under: Liz's Blog Tagged With: ask a points nerd, Credit Cards, credit union, miles, retirement savings, rewards, spring break, stock market, Tropical financial credit union

Wednesday’s need-to-know money news

February 26, 2020 By Liz Weston

Today’s top story: Credit cards that earn 2% cash back or more on purchases. Also in the news: Most Americans go mobile with payment apps, why you shouldn’t let your credit score define you, and the best tax preparation software of 2020.

Credit Cards That Earn 2% Cash Back or More on Purchases
Reward simplicity.

Most Americans Go Mobile With Payment Apps — Here’s How They Roll
Nearly 80% of Americans are using these apps.

Keeping (Credit) Score: Don’t Let a 3-Digit Number Define You
You are more than your credit score.

The best tax preparation software of 2020
NerdWallet ranks the options.

Filed Under: Liz's Blog Tagged With: credit card rewards, Credit Score, mobile payment apps, tax preparation software

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