• Be patient. Focus on the long-term. Short-term trends do not predict long-term results. What happens today isn’t necessarily indicative of the future. If my three-year-old doesn’t like chicken nuggets today, there’s still an equal chance that tomorrow they’ll be her favorite. Don’t make a grocery list based on what she likes or doesn’t like in that moment.
• Be humble. Life is random and it rarely happens exactly as I expect it to. I can’t control the ultimate outcome but if I have a plan and learn from the successes and failures of others, I can increase the likelihood of getting the outcome I want.
• What works for me, may not works for others. There is no shortage of advice out there, from friends, family, strangers, or “experts”. It’s important to listen and learn but also to know that what works for one, may not work for another. I may be in a different situation than those giving/receiving the advice, or at a different point in life, or trying to solve a different problem. I need to find a plan or strategy that I feel comfortable with it. Stick with the plan and be consistent, but have the awareness to know that adjustments must be made as time goes by.
• Keep it simple. Instead of the hot new “toy of the year”, opt for the old, time-tested and boring cardboard box. It’s simple. It’s cheap. It’s easy to understand. Its entertainment value has been reliable throughout the years and across generations. And, it’s cost-to-entertainment ROI is probably equal to or greater than that of the flashier, more complex options.

With that said, here are the stories that caught my eye this week:

MONEY: Congress Blesses Roth IRAs For Everyone, Even The Well Paid (Forbes)
If you’re one of the folks who earn too much to contribute directly to a Roth IRA, Congress just officially gave their blessing on another way for you to fund one anyway via a “backdoor approach”. As the article states, “It works like this: if you earn more than $120,000 as a single, or $186,000 as a couple, you contribute to a traditional, nondeductible IRA, instead of a Roth.  Then, presto chango, you immediately convert the money in the traditional IRA to a Roth IRA.” This strategy isn’t new but it’s one that has always been shadowed with the uncertainty of its tax legality, but now we have our answer. Backdoor Roth IRA’s require a little more planning than the article suggests and, therefore, may not make sense for everyone. At the very least, though, the strategy puts an additional tool in the retirement planning toolbox.

LIFE: Don’t dread old age. (The Guardian)
I unexpectedly stumbled onto this article this week. It is a beautifully and emotionally written piece by a 94-year-old British gentleman reflecting on his own life and providing his advice to others. I won’t summarize it because I fear that I’ll be doing it an injustice. So, if you choose not to read it, at least take the time to read this powerful passage from the piece, “All of you, when young, will make your own history: you will struggle, you will betray some and others will betray you. You will love and lose love. You will feel profound joy and deep sorrow and during all of this, you will grow as an individual. That’s why it is your duty when you get old to tell the young about your odyssey across the vast ocean of your life. It is why when death does come for me – even if it mauls me with decrepitude before it takes me – I will not lament either my old age or my faded youth. They were just different times of the day when I stood in the sun and felt the warmth of life.”

KENTUCKY PENSIONS: ‘Devastating’ cut could mean some retired Kentucky teachers pay thousands more in insurance (Courier-Journal)
With no new pension bill in sight, everyone’s attention is now being diverted to the details of the two-year spending plan proposed by Governor Bevin last week. As expected, the proposed budget made some hard cuts to the state’s overall spending. One of the biggest points of contention with the plan is the amount of money (or lack thereof) budgeted for retired teachers’ health insurance coverage. As the article states, “KTRS had requested $145.5 million in state funding.” However, the proposal budgets $0 to retiree health insurance for the next two years. This spending cut and subsequent increase to retirees’ portion of health insurance costs would be a huge financial burden for retirees who have yet to reach age 65 and become eligible for Medicare coverage. The important point to note is that, as of now, the budget is still a “proposed” budget and has yet to be voted on and approved by legislators.

JUST BECAUSE: How to buy happiness (VIDEO: TED Talk)
I’ve heard it. You’ve heard it. We’ve all probably said it at some point, “Money can’t buy happiness!” But, is that really true, or are we simply spending the money incorrectly? This TED talk highlights a study showing that money can and does indeed buy happiness, but…only when it is spent on or given to others. The study found when you spend it others, the increase in happiness that we experience stays with us much longer than if we were to spend the money on ourselves. And, most interestingly, the amount of money spent ($1 or $1,000) and how it is spent (unexpected gift for mom or donation for a stranger’s life-saving surgery) does not change the level of and length of time that we experience the increased levels of happiness.

(sitting in the OB’s office; 38 weeks, 3 days into pregnancy)

Wife: How’s the baby measuring?
Doctor: Great! His heartbeat is good. Weight is good. He feels like he is in a birthing position, head down, feet up.
Doctor: (with an excited smile on her face) You’re ready. With everything I’m seeing, I wouldn’t be surprised if you had this baby tonight.
Me: (turning a ghostly shade of white and staring blankly into the distance)
Doctor: (snapping her fingers in front of my face) Hey…are you alright? Are you breathing?

Okay. Okay. So if you reviewed the game tape, I’m sure the conversation didn’t happen exactly like that…but man, that is exactly how it felt…raw, unexpected panic. 40 weeks! Doc, you told me 40 weeks. I have another week and a half to plan for this moment. Now, you’re telling me it could all go down tonight?!? Where did the time go? Am I even ready?

And so begins the seemingly endless line of self-questioning: Who do I call first? Who will watch our daughter? Who will feed the dog? Where are the “Go” bags? When do we head to the hospital? Where do I park? What entrance do we go in? What if there is a snowstorm? Ahhhhhhhhhhh!!!

I’m thankful for the heavy-handed dose of reality delivered by the doctor, even if it was unintentional. It was the reality check I needed. Having had the last 24 hours to anxiously think and talk through the process and tackle some of the ‘what if’ scenarios, I feel better. More relaxed. More in control. Better prepared.

With that said, here are the stories that caught my eye this week:

MONEY: Raising a Kid Costs How Much? Ways to Whittle Down the Costs of Parenthood (The Simple Dollar)
“The costs to raise a child to the age of 18 have surged to a staggering $233,610.” Anyone else starting to feel a little sick after reading that? No…just me, the very-soon-to-be father of two kids??? All kidding aside…the article points out some great cost-saving tips, some obvious and some not-so-obvious, for parents to consider. In my opinion, it’s a must-read for any first-time parent.

LIFE: What is the Perfect Age? (Wall Street Journal)
Great job to whoever wrote this headline because it totally sucked me in. Are your best years ahead of you or behind you? That’s what we really want to know, right? Spoiler alert: the answer is both. The article takes both a scientific and social angle in evaluating what the “best” age is for various physical activities and qualities of life. Some will make you say, “well, duh!” and others, “hmmm, that’s not what I expected”.

KENTUCKY PENSIONS: Kentucky’s budget puzzle is missing a huge piece: pension reform (The Courier-Journal)
On Tuesday, Governor Bevin revealed his proposed state budget for the next two fiscal years, and as expected, it was full of budget cutting measures. Unfortunately, the budget didn’t provide much insight into what future pension reform will look like. What it did tell us, however, is that the budget will “fully fund pension plans under current law — about $3.3 billion in state General Fund money over the next two years”.

JUST BECAUSE: When it’s 5 a.m. at an Irish Wedding – Ho, Ro, the Rattlin’ Bog (VIDEO)
This video has no relevance to anything else in this email…but…I…cannot…stop…watching…it! Simply impressive and amazing! I challenge you to watch it without smiling and tapping your foot along to the rhythm.

Schools were called off in anticipation of a wintry mix. The weather forecasts called for rain to fall through the night. They said temperatures would steadily drop to below freezing. The rain would turn to sleet…and the sleet to snow. To top it all off, the wet roads and streets would become treacherous as ice began to develop.

Then, we all collectively asked ourselves, “Do we have enough bread, milk, and eggs?”…and an abnormally large percentage of us (my household included) hopped in our cars and headed off to the store in preparation. But why? Do French Toast and scrambled eggs taste better when it snows? (Admittedly…the odds of French Toast consumption increase exponentially for my family during a snowstorm.)

Fortunately, meteorological technology has advanced our society to a point in which we have the luxury of procrastinating in our winter weather preparedness. We rely more and more on short-term predictions to help us decide on whether we can push off that grocery trip for one more day, and that’s possible because we’ve become fairly consistent at accurately predicting tomorrow’s weather.

For this reason, I envy meteorologists. Unlike predictions of tomorrow’s weather, stock market predictions have been incredibly unreliable…guesses at best. Despite their unreliability, we are still naturally attracted to or even seek out that glimpse into the future in hopes that we can delay preparation for a “snow storm” until tomorrow, or until absolutely necessary.

Market predictions, whether positive or negative, should never be relied upon for investment recommendations as they are only one person’s “guess” at what they think could happen. However, these guesses do serve as a good reminder to reevaluate how prepared we are to handle certain market scenarios. When reading these predictions, it’s important to be proactive and ask yourself, “Do I have enough bread, milk, and eggs to weather the storm?”

With that said, here are the stories that caught my eye this week:

MONEY: Stock-market investors should ‘brace for a possible near-term melt-up’ (MarketWatch)
Predictions! Yay! Throughout this historically long bull market, predictions have continually been made warning that a bear market or downturn is coming…and they are right. At least, they will be one day, maybe this year, maybe in five years, or maybe even ten years from now. The nature of the stock market is cyclical. It will eventually go down, but when, how far, and for how long, no one knows.

LIFE: The Bizarre Motivating Power of Aging into a New Decade (The Atlantic)
The inner (and outer) nerd in me found this one fascinating. I’m a sucker for a good study on human behavior. Why do we run our first marathons or mini-marathons in our “nine-ender” years (ages 29, 39, 49, & 59)? And, why do we tend to run the same race faster when we’re 39 rather than when we’re 38 or 40? Why do we make more life-altering decisions, positive and negative, in these same years? It turns out that we are hard-wired to be energized by deadlines, even if they are somewhat arbitrary, like the end of a decade in age.

KENTUCKY PENSIONS: KY lawmakers expect pension reform bill to be filed within days (WDRB)
As of this writing, we are ten days into the 2018 voting session and a new pension bill has yet to be officially filed. However, hints of details regarding a revised proposal are beginning to emerge. The article suggests that we should expect a “watered down” version of the original pension reform bill in the coming weeks. Though, what “watered down” means, exactly, is still unknown.

MOTIVATION: Fail Early, Fail Often – Will Smith (Youtube)
What’s life without positivity and motivation? I found this gem making its way across social media this week. The “Fresh Prince” delivers a powerful message about the role of failure in success and happiness. Growth is propelled through deliberate practice and controlled failures. Failure is not defeat. It’s a learning opportunity and a springboard to being the version of yourself that you strive to be.

“Excuse me, sir, but could I get one of your finest Partridges in a Pear Tree, please?”

That’ll be $219.95. Up 4.7% since this time last year.

Apparently, we experienced a shortage of or a higher demand for pear trees according to this year’s PNC “Twelve Days of Christmas” Price Index.

If you’re like me, you’ve always found this “True Love” character in the “Twelve Days” Carol to be quite…eccentric. I mean really…nothing says “I love you” better than gifting 184 birds in twelve days!?!

Leaving the uniqueness of the gifts aside, I admire the effort and dedication that it took for Mr. True Love to save up for this elaborate display of affection (Note: being a financial planner, instead of seeing Mr. True Love as a privileged Trust Fund recipient, I like to assume that he diligently saved each and every month for the first ten years of marriage to surprise his lovely bride with a Christmas that she’ll never forget. Who doesn’t enjoy the story of a hard-working, save-first, hopeless romantic…am I right? I’m honestly surprised the Hallmark Channel hasn’t already obtained the movie rights!)

Anyhow, let’s look at how a newly married Mr. True Love saved up for his epic Christmas. If we assume he saved the same amount each month AND invested his savings in a low-cost S&P 500 index fund for the last ten years, here are Mr. True Love’s numbers:

• Monthly investment amount: $842.17
• Total investment over 10 years: $101,060.40
• Annualized return of S&P 500 index over last 10 years: 8.4%
• Investment account value after 10 years and total price tag of gifts: $157,588.00
• Number of gifts given over twelve days: 364
• Number of Significant Others who were so appreciative of the display of affection that they wrote a Christmas song that will be caroled every Christmas season for decades to come: 1

Moral of the story: it doesn’t matter what your goal is or even if it may seem a little different to others. If you break it down into manageable bite-size chunks and put the power of compound interest on your side, in only a matter of time, you too could be the lucky owner of 184 birds! 😉

With that said, here are the stories that caught my eye this week:

Christmas Price Index (PNC)
For more than 30 years, PNC has been calculating the prices of the twelve gifts from the classic carol “The Twelve Days of Christmas.” This year saw a slight increase in prices pushing the total for the “core” gifts (i.e. one partridge in a pear tree, two turtle doves, etc.) to $34,558.65. The total for all 364 gifts represented in the carol topped out at a whopping $157,558.00. The overall cost only saw a slight increase this year, but the increase was driven by the “cost increases for the Pear Tree, the increased demand for Golden Rings and wage increases for the Lords-a-Leaping.”

Mr. Index Worried About US Pensions? (Pension Pulse)
On a more serious note: when Jack Bogle (Mr. Index) talks, I listen…and when he says that he worries that U.S. pensions will not be able to meet their 7.5 to 8% return assumptions over the next decade, I take notice. This is particularly alarming considering that the Kentucky Teachers’ Retirement System Board currently uses a 7.5% assumption for their analysis, and just last month, requested a redo on the analysis of the proposed pension changes because it used a conservative 6% return assumption. The higher the assumption rate, the lower the amount that the State needs to budget for funding the pension plan each year. If Mr. Bogle is correct though and the state over-estimates its returns for a prolonged period of time, we could be having this same underfunding conversation 10-15 years down the road.

Acting House Speaker Osborne says pension reform agreement and bill drafting process ‘substantially complete’ (Kentucky Chamber of Commerce)
As expected, it sounds like a modified version of the Kentucky Pension Reform proposal could be released in the next week or two, based on this interview with the acting House Speaker. There’s no real indication as to what changes to the original bill would be made, but I suspect that the new bill would likely focus on changes to the most hotly debated issues and leave most of the meat and bones of the original reform bill still in place.