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Can you safely supercharge your retirement savings?

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That’s a pretty interesting question, and I think the answer is yes.

By “supercharge” I mean adding auxiliary power to something that’s already strong.

Let me tell you two things that it’s not.

What if I’m in my 40s and don’t have a retirement fund?

First, supercharging the market is not market timing. When you time the market, you’re trying to figure out the best times to buy and sell in order to take advantage of the market’s inevitable ups and downs.

Timing is a notoriously difficult challenge. Its successes and failures depend heavily on luck, very often leaving investors fed up — and without any favorable options except eating crow and accepting losses. That’s not good financially — and certainly not good psychologically.

Second, supercharging does not involve picking stocks or a hot manager.

On the surface, picking “the best stocks” to own seems like a great idea. But in reality, it leads to risky decisions and usually leaves investors with more losses than gains, again eroding their finances and their psyches.

The same applies to finding a “hot” manager, who may have attained fame by using market timing and/or stock picking. No manager, however hot, is immune from the perils of those approaches.

So what is supercharging? I won’t pretend to understand the details of how a supercharger works in a muscle car. Let’s just say it lets the car do more work and increase its output. Can you do that with the stock market? I think so.

Supercharging the market, like supercharging a vehicle, involves small changes that are likely to have large payoffs. I’m talking about the combination of changes anyone can make, combined with lots of time.

Over a lifetime of investing, getting an extra 0.5% return can work wonders. If you save $5,000 a year for 40 years, then retire and live another 30 years, an extra 0.5% return should mean at least $1 million more you can withdraw in retirement and leave to your heirs.

How do you get an extra 05%? Let me count (some of) the ways. Reduce your expenses by buying index funds or ETFs. Reduce your taxes by investing in an IRA. Diversify. Stop trying to time the market. Tilt your equity portfolio toward value stocks and small-cap stocks.

Here’s how that last point could work for a young person who can set aside $1,000 a year (less than $20 a week) for retirement in an IRA or a 401(k) or similar retirement plan.

Every time you add new money, you put 90% of it into a tried-and-true vehicle like a target date retirement fund. In a single package, that fund will insure that you automatically do most of the things good investors should do.

The other 10% of each investment goes into a “booster” fund that invests in assets with a long history of outperforming the overall market. This adds a bit of risk, but only to 10% of your investments.

In a new book, Richard Buck and I recommend using a small-cap value fund as this booster, and the results can be astounding.

Imagine two possible scenarios for this young investor. The results are based on average 40-year returns from 1928 through 2019.

One (non-supercharged): You invest your full $1,000 every year in the S&P 500 index
SPX,
+1.29%
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which gives you an assumed long-term return of 11%. At the end of 40 years your account is worth $581,826. That’s a pretty nice result from the $40,000 you put in.

Two (supercharged): You put 90% of your money into the S&P 500 and the other 10% into small-cap value stocks. This asset class had an average 40-year return of 16.2% from 1928 through 2019. At the end of 40 years, without any rebalancing, you have $759,670 — about 30% more money.

That big difference, by the way, is more than four times the number of dollars that you initially invested over the years — all from changing how you invested $100 a year. That’s what I call supercharging the market.

Obviously, the dollar figures can be much greater for investors who save more.

The hard part of this strategy, like that of any investment strategy, is saving money in the first place. In more than half a century of working with investors, I’ve learned that saving is the biggest factor that separates who will have enough to retire comfortably and who will struggle.

Ben Franklin once said: “An investment in knowledge pays the best interest.”

You can learn more in this podcast entitled “Supercharge Your Portfolio and Earn Millions More,” in which Richard Buck and I are interviewed about our new book. Among the highlights: Rich tells Doc G what he thinks is the best market-timing advice he ever got from me.

Paul Merriman and Richard Buck are the authors of “We’re Talking Millions! 12 Simple Ways To Supercharge Your Retirement.”



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My parents made my sister executor of their $4 million estate, and joint owner of their bank accounts. Should I be worried?

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Dear Quentin,

I just found out that my parents (who are in their mid 80s) have named my sister as their successor trustee, and executor of their estate and wills. They have also put her name on all their financial accounts “in case something happens to us.”

I have no reason to suspect my sister of any nefarious motives, but having her name as joint owner on their accounts seems potentially problematic to me in case of their passing. What are the pros and cons of this arrangement?

Their estate is probably worth about $4 million. We have five other siblings who are currently unaware of this arrangement. Can you provide any resources or articles I could show my parents regarding better ways to accomplish their goal of having someone in charge of their finances?

Concerned Son

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

Dear Son,

People often don’t do anything nefarious, until they have the opportunity to do so and/or run into financial difficulty of their own. That may not be the case with your sister, of course, but your parents should absolutely know the meaning of making one of their children a co-owner on their bank accounts, if their intention is to merely have your sister assist with bills.

Is she a co-owner of this account, or is she a co-signer? If it’s the former, your sister is a joint owner and can spend the money as she wishes. She would likely be liable for debts on that account after your parents’ death. If it’s the latter, your sister has the right to sign checks on your parents’ behalf. To complicate matters, not all banks have the same definitions for “co-owner” and “co-signer.”

Many people don’t understand the difference between being a co-signer and a co-owner. There are many cases of children listed as co-owners (rather than authorized signers) on those accounts who have emptied their parents’ bank account before and after they died. Sometimes, they did not keep enough (or any) receipts, and have been wrongly accused of emptying a parent’s account.


Many people don’t understand the difference between being a co-signer and a co-owner.

In the letters I have received on this issue,the damage was often already done, typically caused by a combination of the three “Gs” — grief, gripes and greed — when long-simmering sibling rivalries boil over. People do things that they may not otherwise do if their parents were there to witness it. You are correct to ensure your parents’ action is in accordance with their wishes.

There are other ”what ifs”: What if your sister dies first? The account would likely become part of her estate too, with a share to be distributed to her children, which could then involve paying a state inheritance tax. Your parents’ accounts could also be “paid on death” or “transferred on death,” avoiding the public and often time-consuming probate process. Read more here.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

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 group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

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S.E.C. Commissioner Hester Peirce on the outlook for crypto regulation, and whether this will finally be the year we see a Bitcoin ETF.





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My husband doesn’t get along with my son. I brought most of the wealth into our marriage. How do I split my estate?

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Dear Quentin,

How do couples typically handle their estates in a second marriage? My husband and I have been married for seven years, and it is the second marriage for both of us. I have one adult child from my previous marriage; he has no children.

I brought the majority of our wealth to our marriage, including almost $1 million in my 401(k) and a nice home that is almost paid off; otherwise, we have no debt. My husband and I bought a second home together. We work hard to fund our new 401(k)s, and own a successful business together.

I am turning 65 this year, so estate planning is long overdue. My husband is five years younger than me, and we are both in very good health. We have two issues facing us: I see our retirement as living very comfortably on the monthly income generated by our 401(k)s, pension, Social Security, etc., and leaving whatever may be left to my son.


‘The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him.’

I am not interested in scrimping, but I want to be able to have enough money to last us until age 90 (or beyond) by not touching the principal. My husband is more interested in dipping deep into our savings, and living it up in retirement while we are young enough to enjoy it.

The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him, to the point that neither one wants anything to do with the other. As far as he is concerned, my son doesn’t meet his expectations, and so deserves nothing from me and certainly nothing from him.

I want my estate planning to be fair to both my new husband and my son. How do people typically handle this type of quandary? I think that I need to create some type of trust to pass on my share of our estate to my son. My pre-marriage assets involved my son as I pursued my graduate degree through night school and worked long hours throughout his childhood.

Second Wife

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

Dear Second Wife,

Don’t allow your husband’s feelings toward your son to influence your estate planning.

Your relationships with your husband and your son and your own plans for retirement are all fair game when making decisions about your estate, but your husband and son’s fractured relationship is their business, not yours. You worked hard for this money, and your son is your legal heir. Any effort by your husband to spend all of your savings and fritter away any inheritance that you intended to leave to your son should be resisted at all costs.

You have worked too hard your entire life to compromise your plans for a comfortable retirement where you have money set aside for long-term medical care insurance, unforeseen emergencies and/or your son. If you jointly own your home, you can leave your half to your son in your will, and specify it can only be sold after your husband passes away.

If you own the home, you can give your husband a life estate. Your son would pay capital-gains tax on the value of your home when he sells it, and not when you bought it. You could also make your son the beneficiary on your life-insurance policy, and/or gift him a certain amount of money per year to see how he manages and spends that money.

Figure out what is fair to yourself first before moving on to what is fair to your husband and your son. It’s OK to put your needs first. I caution against your dipping into savings at a rate that is beyond your own risk tolerance.

Ultimately, you are entitled to leave all other separate property to your son when you die — and, along with a financial adviser, set up a trust with that in mind for you, your husband and your son. Not necessarily in that order.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

Hello there, MarketWatchers. Check out the Moneyist private Facebook
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 group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.



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