OUR 25 FAVORITE MUTUAL FUNDS p 18

YOUR
WEALTH
We’ll help you sow the
seeds of a bright financial
future or tend to what
you’ve already planted. p 38

The Benefits
of a Phased
Retirement p 54
A Look at
Warren Buffett’s
Portfolio p 28

MAY 2024
$7.95 www.kiplinger.com
 May

Kiplinger Personal Finance | Founded in 1947 | Vol. 78 No. 05

16 Briefing

14 The S&P 500 breaks a barrier ...

New FDIC rules for trusts.

INVESTING
18 A Solid Year for the
Kiplinger 25
We review our favorite actively
managed, no-load funds and
welcome new members to the
group. PLUS Model portfolios
to help you reach your goals.
GETTY IMAGES

28 Buffett’s Buys and Sells

A look at the Oracle of Omaha’s
most-recent portfolio moves.
Your vacation home has (tax-free) moneymaking potential.
30 Political Headwinds,
Financial Gains
LETTERS The ESG 20 delivered sweet
5 The Cost of Long-Term Care returns amid sour debate.
Plus your thoughts on tax pros,
the Federal Reserve, state 32 Income Investing
disability insurance and more. A 15-year win for high yielders,
by JEFFREY R. KOSNETT.
FROM THE EDITOR
6 A Wealth-Building Boost 33 Beyond the Magnificent
for Kids Seven
Starting early with a Roth or Other stocks in the S&P 500 are
529 plan is a winning strategy. poised to gain ground this year.

AHEAD 34 Street Smart

9 Topic A Investing in big ideas, by
Should you worry about being JAMES K. GLASSMAN.
ʹ laid off? ... Your cereal box is
Cover illustration shrinking ... Your vacation home 37 More About Investing
by Huan Tran could provide tax-free income. News of the ETF 20.

May 2024 1
Contents

MONEY RETIREMENT REWARDS

COVER STORY 54 Ease on Down the Road 66 Find the Perfect Cruise
38 11 Ways to Grow Your to Retirement Cruising is making a

66
Wealth Retirement doesn’t have post-pandemic come-
By following the funda- to be an all-or-nothing back, and the choices
mental steps to create and deal. Dialing back to have multiplied. Check
protect wealth, you can part-time or occasional out our guide to help you
steadily accumulate employment can boost zero in on a trip you’ll
Take a assets and clear the path both your finances and love.
cruise that’s to financial security. your happiness.
memorable— 71 Great Values in Electric
for the right 50 Kiplinger Advisor FUNDAMENTALS Bikes
reasons. Collective 60 Practical Portfolio You don’t have to spend
How couples can talk For patient investors, a small fortune to get a
about money. dividend stocks can good e-bike.
really pay off. Here’s how
51 Money Smart Women to spot the gems.
A financial checklist for PAYING IT FORWARD
widows, by JANET 62 Family Finances 72 Affordable Repairs for
BODNAR. Navigating a gray Car Owners in Need
divorce. This social-worker-
52 Credit/Yields turned-mechanic is
GETTY IMAGES

Lock in high yields on 64 Basics providing practical help

CDs. Supercharge college for her community.
savings with a 529 plan.

2 Kiplinger Personal Finance

 Contents
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Letters
DEMYSTIFYING THE FED
The Cost of TOP MUTUAL FUNDS IN 11 CATEGORIES p 18 I want to let you know how much
I appreciated “How the Federal Re-
Long-Term Care serve Works” (March). I regularly
read similar analysis by other jour-
Thank you for your article “Pre- nalists, and I’m not quite sure I ever
pare to Pay for Long-Term Care”
(March). As a financial planner, I TRIM YOUR truly grasp what they’re reporting.
But your plain-speaking style gave
believe there are other important me a broader understanding of the
points to consider. If a client has concepts and landscape.
adequate assets to fund retire- Martin Schwartz, St. Augustine
ment, their plan should be stress- NOW AND IN THE FUTURE p 40
tested to determine how it will STATE DISABILITY INSURANCE
fare if long-term care is needed. MARCH 2024
$7.95 www.kiplinger.com
“Why You Should Consider Disabil-
Manage the Cash Reward
If clients have permanent life in- High Cost of
Long-Term
In on
Midsize
Yourself
With a Long
ity Insurance” (March) didn’t men-
Care p 54 Stocks p 28 Vacation p 66
surance or variable annuities, the Display until March 5, 2024 tion that some states have disability
values within those contracts can insurance programs. For example,
often offset some or all of the cost in California, employees’ mandatory
of a long-term-care contract using ments for inflation. That may payroll deductions include a tax
a 1035 exchange. And finally, a cover only 50% of our costs in for the state’s short-term disability
reverse mortgage can be a better 20 to 30 years. Our insurance program, which generally covers
option for an aging individual company has offered us in- a worker’s loss of earnings due to
or couple who would otherwise creased coverage but at much medical disability for up to a year.
be forced to sell their home. higher premiums. So we are in- Robert Klepa, Santa Monica, Calif.
Jay C. Burgman, Jamison, Pa. stead planning to self-fund the
additional cost, if needed. We EXTENDED GETAWAYS
My wife and I are both 65 and think this approach is the best “A Guide to Taking a Long Vacation”
have LTC insurance that will pay way to balance our risk. (March) states that Medicare doesn’t
$300 per day, with no adjust- Ken O’Gorman, Flemington, N.J. extend overseas. That’s true for origi-
nal Medicare, but nearly all Medicare
Advantage plans cover emergency
care and urgent care overseas, al-
MORE ON TAX PROS In your explanation of the creden- though some have dollar limitations.
Many tax professionals provide tials that different types of tax pre- Medicare supplement plans also have
services beyond preparing a tax parers have, everything you said foreign travel emergency coverage.
return (“Should You Hire a Tax about certified public accountants, John H. Damitz, via e-mail
Pro?” March). I’m a certified public enrolled agents and attorneys is cor-
accountant, and I send out a quar- rect, but it is incomplete (“Count- Your article was a pleasant reminder
terly newsletter to educate clients down to Tax Day,” March). You state of some trips I took a few years ago. I
on various financial and tax-related that enrolled agents and attorneys picked four cities and moved to each
topics. Clients e-mail me tax-related must meet continuing education of them for a few months. I found
questions throughout the year, and requirements and that attorneys lodging through real estate agents
I charge them only if some calcula- must abide by professional ethics re- and apartment-management compa-
tion is involved. If clients need to quirements. CPAs must also undergo nies, and I kept four boxes of house-
adjust their tax withholding, I help continuing education and abide by hold necessities in my hall closet so
them complete the forms. professional ethics requirements. that I could pack up and go quickly.
Steve Cox, Cary, N.C. Stanley Schreffler, Oro Valley, Ariz. Peter Elliott, via e-mail

CONTACT US: Letters may be edited for clarity and space, and initials will be used on request only if you include your name. Send to
Kiplinger Personal Finance, c/o Future US LLC, 130 West 42nd Street, 7th Floor, New York, NY 10036, or send an e-mail to feedback@
kiplinger.com. Please include your name, address and daytime telephone number.

May 2024 5
From the Editor

A Wealth-Building Boost for Kids

was sitting in my eighth- you’d like to assist), you can help
grade algebra class when them get off on the right foot as they
I first learned about the start their journey toward a flour-
power of compound inter- ishing financial future.
est. On an overhead pro- Children who are old enough to
jector, the teacher laid out earn money from work—even gigs
the math to show a group of 13- and such as baby-sitting or mowing the
14-year-olds how much our savings neighbor’s lawn count—can fund a
could grow by the time we were in Roth IRA. Yearly contributions are
our sixties if we started to invest capped at the amount the child
while we were young. Twenty-five earns or the annual IRA contribu-
years later, I’m fuzzy on the exact tion limit (in 2024, it’s $7,000 for
figures my teacher used, but I re- those younger than 50), whichever
member being dazzled by the effects is less. You can provide money to
of starting early. put in a child’s Roth as long as the
Here’s an example from Fidelity contributions don’t exceed the an-
Investments: Say that at age 25, you nual limits. If the child is a minor, reduce the student’s aid award by as
start saving $6,000 a year in a retire- you’ll need to set up a custodial ac- much as $5,000. But under the new
ment account and earn an annual count. (For more on the advantages rules, which take effect with the
return of 7%. By the time you reach of Roths, see the cover story.) FAFSA for the 2024–25 academic
age 67, you’ll have $1.48 million in On page 64, we detail the benefits year, students don’t have to report
your account. If you wait just five of a 529 college-savings plan, a tax- such cash support. That means
more years, until age 30, to start advantaged investment account in grandparent-owned 529s will no
saving the same annual amount and which you can sock away money for longer affect aid eligibility.
earn the same return, you’ll have a child’s future education. Thanks Finally, if you have adult children
$1.03 million at age 67, leaving you to recent changes in the Free Appli- or grandchildren who want to buy a
with almost half a million dollars cation for Federal Student Aid home, assisting them with the down
less than if you had begun at 25. (FAFSA), grandparents have a sig- payment can be a valuable gift. As
(Even if you can’t afford to set aside nificant new advantage. Under the we point out in the cover story,
several thousand dollars a year, any old rules, a 529 owned by a grand- homeownership is still a good in-
amount you can stash away helps.) parent (or anyone else who is not vestment, despite the challenges
Saving early and often is one of the student or parent) is not counted many buyers face in today’s market.
the core tenets of successful wealth as an asset on the FAFSA, but distri- In 2024, you can give away up to
building, and we review it and more butions from grandparent-owned $18,000 per person in financial gifts
in our cover story, which starts on plans are counted as untaxable in- (married couples can give $36,000
page 38. come for the student. Student in- per recipient) without filing a gift
come is assessed at a rate of up to tax return. So, for example, you and
Lend a hand to your kids or grand- 50% on the FAFSA, meaning that your spouse could provide your
kids. If you have children or grand- a 529 distribution of, say, $10,000 child and his or her spouse or part-
children (or other young people from a grandparent’s account could ner up to $72,000 in 2024 without
worrying about the gift tax.
Thanks to recent changes in the FAFSA,
grandparents who fund a 529 college-savings
PHOTO BY MATT STANLEY

plan have a significant new advantage.

LISA GERSTNER, EDITOR
LISA.GERSTNER@FUTURENET.COM

6 Kiplinger Personal Finance

 EDITORIAL
EDITOR Lisa Gerstner
EXECUTIVE EDITOR Anne Kates Smith
MANAGING EDITOR Frederic Fane Wolfer
SENIOR EDITOR Sandra Block
SENIOR ASSOCIATE EDITORS Kim Clark, Nellie S. Huang
EDITOR AT LARGE Janet Bodnar
CONTRIBUTING EDITORS James K. Glassman, Jeffrey R. Kosnett
SENIOR WRITER Emma Patch
STAFF WRITER Ella Vincent

ART
ART DIRECTOR Will Tims
DESIGNER Eva Garis
HEAD OF DESIGN, FUTURE PLC Rodney Dive

SALES
VICE PRESIDENT SALES, WEALTH & NEWS Stevie Lee (Stevie.Lee@futurenet.com)
SENIOR ACCOUNT DIRECTOR Maggie Kinsky (Maggie.Kinsky@futurenet.com)
ACCOUNT DIRECTOR, WEALTH & NEWS Jeff Nicholson (Jeff.Nicholson@futurenet.com)
ACCOUNT MANAGER Rebecca Haber (Rebecca.Haber@futurenet.com)
ACCOUNT DIRECTOR, WEALTH & DIRECT RESPONSE Anthony Smyth (914-409-4202; anthony@smythps.com)

ADVERTISING OPERATIONS
ADVERTISING OPERATIONS EXECUTIVE Michael Roche (Michael.Roche@futurenet.com)
MEDIA PLANNING MANAGER Andrea Crino (Andrea.Crino@futurenet.com)

CREATIVE SOLUTIONS
ASSOCIATE DIRECTOR Megan Harmon
SENIOR EDITOR Eileen Ambrose

KIPLINGER.COM
SENIOR DIGITAL EDITOR Alexandra Svokos
SENIOR EDITORS Esther D’Amico, Kelley Taylor, Alexandra Twin, Karee Venema
CONTRIBUTORS EDITOR Joyce Lamb
EDITOR Ellen Kennedy
STAFF WRITERS Erin Bendig, Dan Burrows, Donna LeValley, Katelyn Washington
AUDIENCE ENGAGEMENT MANAGER Ben Demers
DIGITAL PRODUCER Quincy Williamson

CIRCULATION
SENIOR CIRCULATION MANAGER Roseann Ciccarello
DIRECTOR, COMMERCIAL ART Lori Smedley

EXECUTIVE STAFF
SENIOR VICE PRESIDENT, SUBSCRIPTIONS MEDIA AND EVENTS Sarah Rees
MANAGING DIRECTOR, WEALTH Shaun Inglethorpe
CONTENT DIRECTOR, WEALTH Louise Okafor
VICE PRESIDENT, MARKETING Christopher Moffa

FOUNDERS
W.M. Kiplinger (1891–1967), Founder
Austin H. Kiplinger (1918–2015), Former Chairman and Editor
Knight A. Kiplinger, Editor Emeritus

CUSTOMER SERVICE
Visit kiplinger.com/customer-service
Call 800-544-0155 or write P.O. Box 37234, Boone, IA 50037-0234

printed in usa

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by FUTURE US LLC, except for double issues as indicated on the cover of each
double issue, and any other occasional combined or extra issues. Frequency
of issues is subject to change without notice, which may include changes
     N)   ´    
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 TOPIC

A
GETTY IMAGES

SHOULD YOU WORRY ABOUT BEING LAID

OFF? IT DEPENDS ON YOUR INDUSTRY
Downsizing has hit certain sectors. But cutbacks may be slowing,
and some companies are expanding. BY SANDRA BLOCK

T
HE U.S. unemployment rate profitable—companies, including not being seen in other parts of the
remains at historic lows, but Meta, Google and Amazon.com. job market, says Nick Bunker, direc-
that’s little consolation for The layoffs have also hit media com- tor of North American economic
workers who have been laid off in re- panies and financial firms, forcing research for Indeed Hiring Lab, a di-
cent weeks. The cutbacks have been many professionals to add “open to vision of job search website Indeed.
particularly brutal in the technology work” to their LinkedIn profiles. Demand for employees in the major-
sector, affecting some of the nation’s But as traumatic as layoffs have ity of industry sectors remains above
most well-known—and historically been for the affected workers, they’re pre-pandemic levels, particularly in

May 2024 9
Ahead

health care, wellness, beauty and than it was in the past. In February, recommends expanding your
child care. “There are layoffs hap- tech-related job postings were down search to positions that are in high
pening, but it’s such a small sliver of 25% from pre-pandemic levels and demand to see whether they match
the population, and they’re happen- are down 2.7% from the previous your skill set. You may be able to ap-
ing for reasons that aren’t applicable three months, according to Indeed ply your existing skills to a job in a
to the rest of the U.S.,” Bunker says. Hiring Lab. new sector, at least temporarily.
In the tech sector, the layoffs re- In addition, job seekers may have
flect a pullback from the industry’s less flexibility when it comes to hy- Protecting your finances. A layoff
rapid expansion during the pan- brid and remote work. Postings in can wreak havoc on your budget,
demic, Bunker says. “They overhired, sectors with a large share of remote- especially if it lasts more than a
and now they’re reevaluating head eligible jobs have fallen from 10.3% few weeks. These tips can help you
count based on demand for services in February 2022 to 8.6% at the end weather the storm.
or products,” he says. The tech indus- of January, Bunker says. The decline Get a clear picture of your separa-
try was also hit hard by the Federal isn’t large, but if you’re determined tion terms. Ask your former employer
Reserve’s interest rate hikes, says to work remotely, it’s probably going for a written notice detailing any sev-
Julia Pollak, chief economist for to be more difficult to find a job than erance you’ll receive, along with any
ZipRecruiter, an online employment it was a couple of years ago, he says. continuance of health insurance and
website. When interest rates dropped In addition, those who work remotely retirement benefits.
to near zero during the pandemic, may be more vulnerable to layoffs Apply for unemployment benefits
investors were willing to take bets than those who come into the office. right away. The sooner you file, the
sooner you’ll receive benefits. Rules

THE SOONER YOU FILE, THE SOONER YOU’LL RECEIVE differ by state, but you can generally
get up to 26 weeks of benefits. You
UNEMPLOYMENT BENEFITS. YOU CAN GENERALLY can find your own state’s unemploy-
ment website at www.careeronestop
GET UP TO 26 WEEKS OF BENEFITS. .org. Search under “unemployment
benefits.”
on tech start-ups and other untested An analysis of 2023 employment Line up health insurance for
ventures, which allowed those com- trends by employer-data provider you and your family. One option is
panies to expand. Now, “investors Live Data Technologies found that COBRA, the federal law that allows
can find a safe return in the bond remote workers were 35% more qualifying workers to continue their
market, so there’s no reason for them likely to be laid off than workers existing coverage, generally for up to
to throw money after risky new who come into the office. 18 months. You’ll typically pay both
ideas,” she says. your portion of the premium and the
There are already signs that the Getting back to work. If you’re look- amount your employer previously
rate of layoffs is slowing and that ing for a job in a competitive market, covered, plus a small administrative
hiring is picking up. There were you can take steps to stand out from fee, for a maximum of 102% of the
fewer layoffs in December and Janu- the crowd. Start by making sure your total cost. If that’s unaffordable, a
ary than in the same periods a year résumé is formatted so it’s easily less-costly option may be an Afford-
earlier, Pollak says, and the median readable by the computer algorithms able Care Act plan. You’ll need to
duration of unemployment for laid- many employers use to screen appli- apply within 60 days of losing your
off workers in January was 9.5 weeks, cants, Pollak says. Microsoft Word job-based coverage. You can access
which is relatively low. Meanwhile, and Google Docs are usually com- the marketplace at www.healthcare
some companies are expanding, even patible. Don’t try to game the system .gov or through your state’s health
in the technology sector, Pollak says. by pasting the job description into care exchange.
Social media giant Meta, which laid your résumé, but if you have the Create a budget. Review recent
off thousands of workers last year, skills listed in the job posting, make bank and credit card statements to
has said it plans to spend more on sure you include them. Use artificial get an overview of your cash flow.
hiring workers this year in areas it intelligence tools such as ChatGPT Look for expenses you can cut until
considers critical to future growth. to critique your résumé, and practice you start receiving unemployment
Nonetheless, in some sectors, such answering interview questions. benefits. This exercise will also
as software engineering, competi- Finally, don’t limit your search to help you estimate how long your
tion for openings is more intense jobs within your industry. Indeed emergency savings will last.

10 Kiplinger Personal Finance

Ahead

INTERVIEW $3.29 a carton. Another It’s also important

IT’S NOT YOUR

option is reformulating to develop price aware-
products with cheaper ness so you can identify
ingredients, but that fluctuations and seize

IMAGINATION: risks compromising

quality. They can absorb
opportunities. Be aware
of what you usually

YOUR CEREAL
the costs, but that’s not EDGAR pay—$2.99 for XYZ
sustainable. So instead, DWORSKY cereal, for example—
many opt for a subtle is a longtime so you can spot a good

BOX IS reduction in product

sizes, effectively imple-
consumer
advocate and
deal when it’s adver-
tised or when you’re in

SHRINKING menting covert price

increases that often go
unnoticed by consumers.
founder of
Consumer World,
which provides
the store and you can
recognize when the
price has changed. Vigi-
To avoid raising prices, some consumer news, lance against deceptive
How can consumers alerts about advertising is essential,
manufacturers are reducing
combat this trend? Con- common scams, although there hasn’t
the size of common grocery sumers must become and advice on been a lot of deceptive
items. Here’s how to fight vigilant about net how to save advertising at supermar-
back. BY EMMA PATCH weights. Paying atten- money. kets. Department stores,
tion to details like the however, have faced
number of tissues in a scrutiny for misleading
box or the weight of cereal boxes is promotions, often inflating regular
crucial. You can use unit pricing on prices to exaggerate discounts.
the store shelf to figure out which
is the best deal per ounce or per 100 Do you recommend using coupons
count. You can also complain to com- to cut grocery store costs? Using
panies, explore competing brands or coupons, especially at stores offer-
opt for store brands, which tend to ing double coupons, will save you
resist downsizing. money. Using digital coupons will
also cut costs, but you need to load
With prices still elevated post- those onto your digital loyalty card
pandemic, what’s the most effective account, usually before you go to
way to save money on groceries? the store, and that can be a pain in
Most people live near two or three the neck.
different supermarkets, so being Unfortunately, consumers who
selective and taking advantage of aren’t computer savvy are losing out

PORTRAIT COURTESY OF EDGAR DWORSKY / PHOTO ILLUSTRATION BY WILL TIMS

bargains is key. Before shopping, on those deals. If you’re one of those
review supermarket ads for sales so folks, go to the customer service
you can identify the best deals and desk and ask whether there’s some
What is “shrinkflation,” and why is make bulk purchases to maximize way you can take advantage of the
this phenomenon occurring? Manu- savings. If an item is nonperishable digital coupon prices. Some stores
facturers are facing increased costs and really a sensational bargain, are beginning to make accommoda-
across the board. Prices of raw mate- stock up. Why buy only one bottle tions for seniors and others who
rials, labor and transportation have of apple juice if it’s on sale? can’t use digital coupons.
surged, primarily due to rising fuel
costs. To offset these expenses, com-
panies have several options. They
can increase prices, but noticeable
price hikes could lead to consumer
backlash. Consumers are very price
sensitive, and they’ll notice if their
orange juice goes up from $2.99 to

12 Kiplinger Personal Finance

 


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Ahead

YOUR VACATION HOME COULD

the IRS said such temporary
rentals didn’t represent regular
business activity. The rise of

PROVIDE TAX-FREE INCOME Airbnb and other vacation rental

services that allow owners of
vacation homes to list their
If you plan to rent out your vacation home, it’s important properties has made the tax
break even more valuable.
to understand how your proceeds will be taxed.
BY SANDRA BLOCK Rules for longer-term rentals.
If you don’t use your vacation

I
F you own a vacation home, The IRS provision allowing home frequently, you may be
there’s a good chance you individuals to exclude short- interested in renting it out for
use it primarily as a get- term temporary income is more than two weeks. Be aware,
away for your family and friends. known as the “Masters rule” though, that once you exceed
But if it’s located in an area that’s because residents of Augusta, the 14-day threshold, you must
popular with tourists, don’t Ga., successfully lobbied for the report rental income to the IRS.
overlook an opportunity to earn exemption back in the 1970s so The good news here is that
extra tax-free income by renting they could rent out their homes you’ll also be eligible for a long
it out. during the annual Augusta Na- list of deductions that will reduce
As long as you rent your home tional Golf Club Masters tourna- your tax bill. Deductible expenses
for 14 days or less during the ment. In enacting the provision, include your mortgage interest,
year, you’re not required to re-
port rental income on your tax 2023 median Average gross
ʾ Capitalization
return. The exception applies no Location sale price rental revenue rate *
TOP
matter how much you charge for Lake Anna, Va. $405,500 $64,121 10.32%
PLACES
the 14-day stay. The rule also ap- to buy a Okaloosa Island, Fla. 360,000 53,832 9.08
plies to your primary residence, vacation
so if Bruce Springsteen and the Sandbridge, Va. 928,900 88,702 6.47
home, based
E Street Band is coming to your on rate of Rehoboth Beach, Del. 618,000 58,992 6.46
town this year, you may be able return from
Navarre, Fla. 420,000 47,531 6.42
to rent your home to fans of the rental
Boss and retreat to your vacation income. *Income minus expenses, divided by the purchase price. SOURCE: Vacasa

home for the weekend.

CALENDAR
Today is National Life Even though the
MAY 2024 2 Insurance Day. Take 13 2023 tax season has
time to review your come and gone, you
life insurance policy to make may still be on the lookout for
sure it meets your current your tax refund weeks after
needs. You may want to buy filing your return. The average
a policy or look for a better tax refund was $3,123 as of
deal than the one you have late February, according to
now if you’ve undergone a the IRS. No matter how much
life change, such as marriage, you’re expecting back from
divorce or a new addition Uncle Sam, if you haven’t re-
to your family. You can ceived your tax refund, track

29 compare policies at www

.accuquote.com or www
.policygenius.com.
it at www.irs.gov/wheres-my-
refund, or call the IRS refund
hotline at 800-829-1954.

14 Kiplinger Personal Finance

 Ahead

MAKING AMENDS
HOW TO FIX AN ERROR
ON YOUR TAX RETURN

W
E all make mistakes, but discov-
ering you made one on your tax
return can be particularly un-
nerving. If you simply made a math error,
the IRS will correct it. But if you’ve ex-
cluded information that could affect your
utilities, housekeeping, repairs, sonal use to 14 days or 10% of
tax bill, you should file an amended return.
and even towels and sheets. the number of days it’s rented,
About 3 million taxpayers file amended
However, if you spend more the home is considered a busi-
returns each year, and the process has
than 14 days a year at your vaca- ness, and you can deduct all of
become easier since 2020, when the IRS
tion home, or more than 10% of the expenses. Depending on
began accepting electronic submissions
the number of days the home is your income, you may also be
of Form 1040X, the document used to
rented, the IRS considers the able to deduct up to $25,000 in
amend a federal tax return. Previously,
home a personal residence. In losses if your expenses exceed
taxpayers had to file the form on paper.
that case, you can only deduct your income.
You generally have up to three years
expenses up to the amount of For that reason, any vacation-
from the date you filed your original return
rental income you’ve received, home owner who is thinking
(or two years from the date you paid any
and you can’t deduct losses. about renting it out should keep
tax due) to file an amended return. How-
Personal days include days you good records, not only of de-
ever, if you failed to report taxable income,
or a family member is using ductible expenses but also of the
which may occur if you overlooked a
the house (even if the family number of days you stay on the
Form 1099 from one of your brokerage ac-
member pays rent), along with property in relation to the num-
counts (or received it after you filed your
days you’ve donated use of the ber of days the home is rented. If
tax return), you should file the amended
house—in a charity auction, for you plan to rent out your vacation
return and pay the additional tax owed as
example—or rented it for less home for more than 14 days, you
soon as possible to reduce interest and
than the going rate for your area. may want to limit the amount of
potential penalties. If filing an amended
GETTY IMAGES

Days spent on the property to fix time you spend there so you can
return will increase the size of your re-
it up don’t count. increase the amount of deduct-
fund, you should file as soon as possible
As long as you limit your per- ible expenses.
to speed delivery of your payment.
You can track the status of your amended
tax return online with the IRS’s “Where’s
My Amended Return?” tool (www.irs.gov/
filing/wheres-my-amended-return) or by
It’s 529 Day—a good
29 time to open a 529
calling 866-464-2050. SANDRA BLOCK
DEAL OF
college-savings plan
THE MONTH: for your children or grandchil-
If you’re looking for a deal dren or to contribute to ac-
on a major appliance, such counts they already have.
as a refrigerator or washer, These state-sponsored, tax-
Memorial Day weekend is advantaged plans allow you to
a great time to shop, says save for college, K–12, or trade
Julie Ramhold, consumer school costs. You can com-
analyst at DealNews.com. pare plans at www.savingfor
Watch for sales on appli- college.com. For more on how
cances at big-box retailers to get the most out of a 529
such as Home Depot, Best college-savings plan, see
Buy and Lowe’s. “Basics,” on page 64.

May 2024 15
Ahead

Briefing
INFORMATION ABOUT
THE MARKETS AND
YOUR MONEY

several attempts before finally

swinging open,” he says. The
market stumbled dramatically
after a couple of reports showed
higher-than-expected inflation,
for example. And there have been
signs below the surface that the
bull is weaker than it appears.
For the year to date through
February 29, just 60% of S&P
500 stocks are in positive terri-
tory, despite all the record highs.
But the market’s fundamental
underpinnings are healthy.
“Fortunately, economic activity
appears solid, and corporations
are once again delivering profits
to shareholders” says John
Lynch, chief investment officer
of Comerica Wealth Manage-

THE S&P 500 BREAKS A BARRIER ment. If the past is a guide,

pushing through a millennial
milestone can presage further
ʾ After the stock market reaches says market historian Sam stock gains, says Stovall. The
big, round-number milestones, Stovall, chief investment strate- 12 months following previous
investors typically split into two gist at investment research firm thousand-mile markers for the
camps: those betting on more CFRA. “Large, round numbers S&P 500 delivered an average
new highs and those worried act like rusty doors and require gain of 10.5%. CFRA sees the
that a powerful bull run is about S&P 500 trading at 5250 over
out of steam. The bullish camp MARKET MILESTONES the next 12 months. When it
is so far holding sway following comes to milestones, says Stovall,
S&P 500 % gain after
the S&P 500’s close above 5000 level Date 12 months “while short-term digestions
for the first time in early Febru- of gains have indeed occurred,
ary. By month’s end, the S&P 1000 2/2/1998 26.0% they have been fairly short in
500 had notched 14 new highs 2000 8/26/2014 –3.0 duration, so view them more
since the start of 2024, after as reasons to buy than bail.”
hitting none at all in 2023. The 3000 7/12/2019 5.7
broad-market benchmark has 4000 4/1/2021 13.1 Index makeovers. S&P Dow
returned 24%, including divi- Jones Indices added e-commerce
5000 2/9/2024 —
GETTY IMAGES

dends, since its low last October. giant and cloud-computing leader
Don’t be surprised if the mar- Average 10.5% Amazon.com to the Dow Jones
ket pauses to digest recent gains, SOURCE: CFRA Research industrial average on February

16 Kiplinger Personal Finance

 Ahead

CAPITAL ONE
26, replacing struggling Wal-
greens Boots Alliance. Mean-

AIMS TO BUY
while, Uber Technologies
replaced JetBlue Airways in
the Dow Jones transportation
average. The index, the oldest DISCOVER
in the U.S., debuted in 1884 as
ʾʇIn February, Capital One
the Dow Jones railroad average.
ANNE KATES SMITH
New FDIC Rules announced plans to buy
Discover Financial in a
for Trusts $35.3 billion transaction.
The deal brings together two
ʾʇAs of April 1, trust accounts are subject
major players in the credit
to new coverage policies from the Federal

63%
card industry, and it creates
Deposit Insurance Corp. Revocable trusts
the potential for Capital One
and irrevocable trusts, which were previ-
to become largest credit card
ously subject to differing and more-complex
lender in the country (cur-
rules, are being combined into a single own-
rently, Chase is the biggest).
ership category. Each trust owner is insured
The percentage of Discover is the smallest
up to $250,000 against bank failure per elig-
workers who had all of of four U.S. companies that
ible primary beneficiary, up to a maximum of
their 401(k) savings in operate a global payment
five beneficiaries. For example, if you are the
a target-date fund at the network; the others are
sole owner of both revocable and irrevocable
end of 2023, according American Express, Master-
trust accounts at the same bank and have
to Fidelity Investments. card and Visa. Capital One,
two primary beneficiaries, your coverage is
Among Generation Z
which issues cards on the
$500,000 total. DEPOSITand PROTECTION
Mastercard Visa net-
workers (those born Depending on how your trust accounts are
works, expects the acquisi-
between 1997 and set up and their balances, your total cover-
tion to make Discover’s
2012), the percentage age may increase or decrease as a result of
network more competitive
increased to 84%. the new rules. But many depositors will not
with the larger networks.
see a change in their insurance limit, accord-
Discover also operates an
ing to the FDIC. LISA GERSTNER
online bank with consumer
deposits, so the merger will
further enlarge Capital One’s
presence in digital banking.
FROM THE KIPLINGER LETTER The deal will have to clear

The Best Time to Book a Flight regulatory scrutiny before

becoming final. A group of
congressional Democrats
Eager to book a trip? Purchasing your For the second year in a row, the
are calling for the Biden
flight too early could cost you. The best cheapest day of the week to fly domes-
administration to reject the
time to buy a domestic airline ticket is tically is Wednesday. Tuesday is the
merger, pointing to concerns
42 days before you travel, on average, second-cheapest. The most expensive?
that it would limit consumer
for 2024, says a new study by CheapAir Sunday. Of course, time of year matters.
choice in an industry that is
.com, an online travel agency. Summer flights typically cost more than
already highly concentrated
That’s a lot closer to your travel date winter. January is the cheapest month,
among a handful of large
than in previous years. Still, that does followed by February. And November
companies. If the merger
not mean you should buy tickets at ex- and July are the most expensive.
gains approval, Capital
actly that time, as other considerations Waiting until the last minute to buy
One expects it to close in
affect airfares, such as destination and a ticket comes with risk. Usually, the
late 2024 or early 2025.
date. Typically, a flight’s price changes final days before a flight see big fare
LISA GERSTNER
several times in its lifetime—an average hikes, though sometimes there are last-
of $98 per shift, says CheapAir.com. minute bargains.

May 2024 17
 INVESTING

A
SOLID YEAR
FOR THE
KIPLINGER All but one of our
favorite actively managed,
no-load mutual funds
gained ground as
markets recovered.
BY NELLIE S. HUANG

18 Kiplinger Personal Finance

 T wasn’t the best of times or the worst of
times, but as markets go, it was a solid
year. Though only a few tech-oriented
stocks drove returns in the S&P 500 index,
the benchmark logged a 30% total return
over the past 12 months through February.
A recent rally helped lift small- and Vanguard Emerging Markets Bond
midsize-company stocks, too; the and Vanguard High-Yield Corporate.
Russell 2000 climbed 10%, and the This year in our annual review
S&P MidCap 400 index rose 13%. of the Kip 25, we’re making two
Meanwhile, enthusiasm about inter- changes. Vanguard Wellington is
est rate cuts to come later this year back. We had removed the fund in
fueled support for most bond mar- 2022 to make way for a commodity
kets. The Bloomberg U.S. Aggregate fund, TCW Enhanced Commodity
Bond index returned 3%. Nothing Strategy, as a hedge against rising
to sniff at here, especially after the inflation. Now, with inflation rates
decimating losses of 2022. normalizing, the commodity market
Through it all, our favorite actively in pause mode and bonds generating
managed, no-load funds—the Kip- decent income, a balanced fund
linger 25—turned in respectable re- makes more sense.
sults. All but one fund gained ground. And we had to find a replacement
As a group, our 10 diversified U.S. for TIAA-CREF Core Impact Bond.
stock funds gained an average of This May, the fund will change its
21%—better than good on an absolute- name to Nuveen Core Impact Bond
return basis, but that lagged the S&P and start charging a 3.75% front-end
500. The best performer was Fidelity load. Make note: Existing shareholders
Blue Chip Growth; the worst was T. will not be subject to the sales
Rowe Price Small-Cap Value, which charge on future purchases. If you
advanced 3%. currently hold shares in this fund,
Our foreign stock funds weren’t we advise you to stay put. We have
far behind, with a 14% average re- confidence in the strategy. But be-
turn, beating the 13% climb in the cause the Kip 25 is the list of our
MSCI All Country World ex U.S. favorite no-load funds, we must re-
index. Fidelity International Growth place it. Enter Dodge & Cox Income.
led; our foreign dividend stock and We summarize each of the Kip 25
emerging-markets fund lagged. funds, new and old, on the following
But the Kip 25’s bright spot was pages. For vital stats on each fund,
fixed income. Our eight bond funds see the table on page 21. For ideas on
as a group gained an average 7%, out- how to build a portfolio with these
pacing the Agg index, thanks in part funds, see the three models we high-
to double-digit returns from three light on page 25. All returns and data
GETTY IMAGES

funds, T. Rowe Price Floating Rate, are through February 29.

May 2024 19
Investing

LARGE-COMPANY panies with potential for above- health care and industrial sectors.
U.S. STOCK FUNDS average earnings growth that the Five managers divide the assets
market has misjudged, has outpaced and invest independently, each
ʾʇDodge & Cox Stock his peer group in nine of the past focusing on growing companies
Dodge & Cox managers are disci- 11 calendar years. priced at a discount that have a
plined about buying low and selling catalyst—a new product, say, or a
high. Recently, the fund trimmed ʾʇMairs & Power Growth restructuring—to push stock prices
its exposure to soaring stocks, such This isn’t your typical growth fund. higher. Over the past 12 months,
as Alphabet, Broadcom and Meta The managers prefer reasonably despite gains in drugmaker Eli Lilly,
Platforms, and plowed that money priced shares, for a start, and two- biotech firm Seagen and medical
into more defensive and stable sec- thirds of the fund’s assets must be device company Abiomed, the fund’s
tors such as health care and utilities. invested in companies based in health care stocks weighed on re-
Over the past 12 months, Dodge & the Upper Midwest, near Mairs & turns. But investments in the in-
Cox Stock returned 17%, which was Power’s St. Paul office. formation technology sector, such
better than 71% of its peers (large In years past, both particularities as data-software firm Splunk (in the
value funds) but trailed the S&P 500. meant the fund didn’t own the tech midst of being acquired by tech giant
The fund’s value tilt has been a hin- stocks that dominate most growth Cisco Systems) and Jabil, an elec-
drance for the past decade because funds. But in 2022, as growth- tronic components maker, were a lift.
growth stocks have dominated re- oriented shares fell, Mairs & Power We’re still fans of the fund, but its
turns in the broad market. Even so, Growth managers snapped up Nvidia, recent record is a good reminder that
Stock boasts an 11% annualized 10- Salesforce and Amazon.com, among it’s best for long-term investors with
a stomach for volatility.
With inflation down, commodity ʾʇT. Rowe Price Dividend Growth
markets stalled and bonds generating To longtime T. Rowe Price Dividend
decent income, we’re replacing our Growth manager Tom Huber, yield
doesn’t matter as much as a track re-
commodity fund with a balanced fund. cord of dividend increases. That trait,
he says, often points to firms that are
year return, a fine record in absolute others, on the cheap. That move financially healthy and stocks that
terms. What’s more, the fund held helped the fund gain 29% over the are less volatile. Ergo, Dividend
up better than the S&P 500 in 2022, past 12 months. Tech is now the Growth has delivered solid returns
dipping just 7%—much less than the fund’s top sector, at 28% of assets, with low volatility. Microsoft, Apple
18% loss in the index. A little diversi- up from 6% of assets a decade ago. and Visa topped the portfolio re-
fication in investment style, in other Lately, the fund has been finding cently. Dividend shares struggled
words, is a good thing. opportunities in firms that are over the past year—they had to com-
harnessing AI to improve sales pete with high interest rates and
ʾʇFidelity Blue Chip Growth and profitability in old-economy snazzy growth stocks for investors’
After a rough 2022, large-cap sectors such as financials, industri- dollars—so Huber took the opportu-
growth fund Fidelity Blue Chip als, utilities and consumer staples. nity to add some new stocks to the
Growth bounced back over the past fund, including chip company Analog
12 months with a 57% return, better ʾʇPrimecap Odyssey Growth Devices, consumer health products
than 96% of its peers. Excitement This fund has been a long-haul firm Kenvue and discount retailer
about artificial intelligence was the star: Its 15-year annualized return Target. He also shed a few, including
big driver, and the fund got a lift of 16% beat the return of the S&P fintech firm Fidelity National Infor-
from market darlings Amazon.com, 500. But since the start of 2018, mation Services and Walt Disney.
Microsoft, Apple, Nvidia and Meta Primecap Odyssey Growth has
Platforms. But non-tech firms helped lagged the benchmark in every ʾʇVanguard Equity Income
the fund’s performance, too, including calendar year except 2022, when Vanguard Equity Income boasts a
athletic wear company Lululemon it held up better. The fund’s below- 2.8% yield, which tops the 1.4% yield
Athletica and ride-sharing company average stake in tech stocks has been of the S&P 500. But dividend stocks
Uber Technologies. Longtime man- a hindrance, as has its above-average struggled over the past 12 months,
ager Sonu Kalra, who hunts for com- position in the underperforming and the fund returned 11%, trailing

20 Kiplinger Personal Finance

 Investing

THE NEW KIPLINGER 25

Everything you need to know about our favorite actively managed, no-load mutual funds.

Total return*

U.S. STOCK FUNDS Symbol 1 yr. 5 yrs. 10 yrs. Yield Expense ratio

DF Dent Midcap Growth Investor DFDMX 22.4% 9.8% 10.0% 0.0% 0.87%
Dodge & Cox Stock I DODGX 17.1 12.3 10.6 1.4 0.51
Fidelity Blue Chip Growth FBGRX 56.5 20.3 16.6 0.0 0.69
Heartland Mid Cap Value Investor HRMDX 8.0 10.7 — 0.7 1.10
Mairs & Power Growth MPGFX 29.2 13.2 10.8 0.8 0.63
T. Rowe Price Dividend Growth PRDGX 19.0 12.8 11.8 1.1 0.64
T. Rowe Price Integrated US Sm Gr Eq PRDSX 18.7 9.3 9.4 0.0 0.80
T. Rowe Price Small-Cap Value PRSVX 3.2 7.0 7.1 0.6 0.82
PRIMECAP Odyssey Growth POGRX 21.8 10.2 11.2 0.5 0.66
Vanguard Equity-Income Inv VEIPX 11.3 10.1 9.8 2.8 0.27

FOREIGN FUNDS Symbol 1 yr. 5 yrs. 10 yrs. Yield Expense ratio

Baron Emerging Markets Retail BEXFX 7.8% 0.7% 2.0% 0.4% 1.38%
Brown Capital Mgmt Intl Sm Co Inv BCSVX 17.9 8.0 — 0.0 1.31
Fidelity International Growth FIGFX 20.9 9.8 7.0 0.5 0.92
Janus Henderson Global Equity Income T HFQTX 7.8 5.7 3.9 4.2 0.98

SPECIALIZED FUNDS Symbol 1 yr. 5 yrs. 10 yrs. Yield Expense ratio

Fidelity Select Health Care FSPHX 11.6% 9.5% 9.9% 0.0% 0.69%
T. Rowe Price Global Technology PRGTX 55.7 11.2 15.2 0.0 0.95
Vanguard Wellington Inv VWELX 17.4 8.8 8.1 2.1 0.25

BOND FUNDS Symbol 1 yr. 5 yrs. 10 yrs. Yield Expense ratio

Baird Aggregate Bond Inv BAGSX 3.8% 0.8% 1.6% 4.0% 0.55%
Dodge & Cox Income I DODIX 4.9 2.0 2.4 4.6 0.41
Fidelity Interm Muni Inc FLTMX 4.9 1.9 2.3 3.1 0.35
Fidelity Strategic Income FADMX 8.1 3.0 3.2 5.3 0.68
T. Rowe Price Floating Rate PRFRX 10.6 4.7 4.0 8.7 0.78
Vanguard Emerging Markets Bond Investor VEMBX 12.3 4.5 — 7.0 0.55
Vanguard High-Yield Corporate Inv VWEHX 9.6 3.7 4.0 6.5 0.23
Vanguard Short-Term Investment-Grade Inv VFSTX 5.6 1.8 1.8 5.0 0.20

INDEXES 1 yr. 5 yrs. 10 yrs. Yield

S&P 500 INDEX 30.5% 14.8% 12.7% 1.4%

RUSSELL 2000 INDEX† 10.0 6.9 7.1 1.5
MSCI EAFE INDEX‡ 14.4 6.8 4.4 3.0
MSCI EMERGING MARKETS INDEX 8.7 1.9 3.0 3.0
BLOOMBERG U.S. AGGREGATE BOND INDEX# 3.3 0.6 1.4 4.9

AS OF FEBRUARY 29. *Returns for five years and 10 years are annualized. †Small-company U.S. stocks. ‡Foreign stocks. #High-grade U.S. bonds. —Fund not in existence for the
entire period. SOURCES: Fund companies, FTSE Russell, Morningstar Direct, MSCI, S&P Dow Jones Indices. Yields listed for bond funds are SEC yields, which are net of fees; stock
fund yields are the yield for the past 12 months.

May 2024 21
Investing

its benchmark, the FTSE High among the fund’s best performers. annualized 11% return has beaten
Dividend Yield index, by a tad. DF Dent Midcap Growth is regain- both the Russell 2000 and the S&P
Matt Hand, of Wellington Man- ing its footing after a sluggish pan- Small Cap 600 indexes.
agement, runs two-thirds of the demic and post-pandemic period.
assets, investing in companies that ʾʇT. Rowe Price Small-Cap Value
balance above-average yield, high- ʾʇHeartland Mid Cap Value This small-company stock fund’s
quality traits and reasonable valua- This fund’s sweet spot—high-quality secret sauce has always been to find
tions. Over the past year, he picked midsize-company stocks that trade unloved, undervalued and undiscov-
up discounted shares in good com- at a value—has been out of vogue. ered businesses. But shareholders
panies, including drugmaker Gilead Instead, speculative, highly lever- might appreciate a little more loving.
Sciences and Intercontinental aged stocks shone in the most recent The slump in small-company stocks
Exchange, which operates global quarter, say the managers, but “our continues, and T. Rowe Price Small-
exchanges for securities trading. goal is to create consistent, lasting Cap Value has been even slumpier.
A team from Vanguard’s quantita- value for our shareholders over the The fund lagged its peers in 2022 and
tive equity group led by Sharon Hill long term.” 2023, and over the past 12 months,
has run one-third of the fund since The managers look for bargain- its 3% return has trailed the Russell
2021. She recently customized the priced stocks that meet the firm’s 2000 index and the typical small-cap
computer model her team uses to 10-point security-picking process, value fund. We’re watching the fund
choose stocks for this fund. It now which focuses on high-quality com- closely.
emphasizes free cash flow (money panies that have positive momentum In the fund’s favor: Since he took
left over after operating expenses and in earnings growth and share-price over nearly a decade ago, manager
spending to maintain and expand the movement. The approach has re- David Wagner beats his peers and
business), a key measure of a compa- sulted in above-average returns keeps pace with the Russell 2000
ny’s ability to pay its dividend and with below-average volatility over with a 7% annualized return. De-
fuel future growth. Recent top per- the fund’s nine-year history. But over pressed share prices have kept him
formers include utility Vistra and the past 12 months, the fund has busy recently. Over the past year,
energy firm Marathon Petroleum. lagged its bogey, the Russell Mid Cap he has scooped up discounted shares
Value index. in biotech firm Cabaletta Bio and
SMALL- AND MIDSIZE- waste-management company Casella
COMPANY U.S. STOCK FUNDS ʾʇT. Rowe Price Integrated Waste Systems, among others.
U.S. Small-Cap Growth Equity
ʾʇDF Dent Midcap Growth A computer model drives the stock FOREIGN STOCK FUNDS
Midsize firms that dominate their picking at T. Rowe Price Integrated
industries, have sustainable earnings U.S. Small-Cap Growth Equity, so ʾʇBaron Emerging Markets
growth and employ smart executives manager Sudhir Nanda’s retirement “It’s a tough time for emerging-
make prime candidates for DF Dent later this year is not a huge concern. markets growth,” says manager
Midcap Growth. But price matters. Two newly named associate man- Michael Kass. The asset class is
The fund avoided the handful of agers, David Corris and Prashant bumping along a 30-year trough,
richly priced growth stocks that Jeyaganesh, will take over the fund relative to U.S. stocks, on valuations
topped the Russell Mid Cap Growth in August. But we are watching the and sentiment. What’s more, unlike
benchmark over the past 12 months— fund closely and considering other in U.S. markets, growth stocks in
in late 2023, some traded for 40 or options. emerging markets have lagged their
more times year-ahead earnings Nanda’s model is designed to build value counterparts three years in a
estimates, says comanager Bruce a low-turnover, low-volatility port- row. And declining shares in China—
Kennedy. That’s in part why DF folio. It focuses on specific stock which still account for the biggest
Dent Midcap Growth fund lagged traits—valuation, profitability, capi- chunk of the MSCI Emerging Mar-
the index over the period. Even so, tal allocation, earnings quality and kets index—haven’t helped. Over the
some “steady-Eddie companies” revisions in earnings estimates, and past 12 months, the fund eked out an
helped offer some downside pro- price momentum. When markets 8% gain; the EM index returned 9%.
tection, he says. Gains in aerospace soured in 2022, the fund held up bet- Fintech bets have helped, including
firm TransDigm Group (up 63% ter than 79% of its small-cap growth two in Brazilian companies XP and
over the past 12 months) and insurer fund peers. And since Nanda took StoneCo. So have the fund’s stakes
Goosehead Insurance (up 62%) were over the fund in late 2006, the fund’s tied to the theme of growth in India’s

22 Kiplinger Personal Finance

A STRAIGHTFORWARD INCOME?
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bonds is federally tax free. obligation whatsoever.
Potential Safety of Principal
With municipal bonds, investors are paid back the full
face value of their investment at maturity (or earlier,
if called) unless the bond defaults. This historically
low risk is essential for many investors, particularly FREE
those in, or close to, retirement. In April of 2022,
Moody’s Investor’s Service found that rated investment-
BOND GUIDE
grade municipal bonds had an average cumulative without cost or obligation
10-year default rate of just 0.09% between 1970
and 2021. Therefore, they can be an important part In the Bond Guide, you’ll learn:
of your portfolio. • The benefits and risks of municipal bonds
Potential Tax-Free Income • Strategies for smart bond investing
Income from municipal bonds is not subject to federal • Municipal bond facts every investor
income tax and, depending on where you live, may also should know
be exempt from state and local taxes. Tax-free income
can be a big attraction for many investors. CALL (800) 318-4850
About Hennion & Walsh
Since 1990, Hennion & Walsh has specialized in
investment-grade, tax-free municipal bonds. The
company supervises over $3 billion in assets in over
16,000 accounts, providing individual investors with
discipline, personal service and integrity.

© 2024 Hennion and Walsh. Securities offered through Hennion & Walsh Inc. Member of FINRA, SIPC. Investing in bonds involves risk
including possible loss of principal. Income may be subject to state, local or federal alternative minimum tax. When interest rates rise, bond
prices fall, and when interest rates fall, bond prices rise. If sold or called prior to maturity the amount received may be less than the amount
paid, and the yield received may be less than the yield calculated at purchase. Past performance is not guarantee of future results.
Investing

consumer-finance sector, such as invest in large growing companies for the S&P 500. But the sector is
Nippon Life India Asset Management. outside the U.S.). Weiss favors foreign broad, which means at times, while
But coming U.S. interest rate cuts companies with good multiyear pros- some parts of the sector are in retreat,
and an expected end to a 14-year pects and a stronghold in their indus- others are advancing. Over the past
bull market in the U.S. dollar may try. Over the long haul, his playbook year at Fidelity Select Health Care,
lift emerging-markets stocks. Other has delivered solid index-beating re- holdings in pharmaceutical compa-
catalysts are aligning, too: A focus sults. Tech firm ASML Holding, nies Pfizer and Bristol Myers Squibb
on supply-chain diversification (away drugmaker Novo Nordisk and luxury and health provider Agilon Health
from China) is fueling growth in the goods purveyor LVMH Moët Hen- hurt the fund’s performance, and
developing world. And India is be- nessy Louis Vuitton are top holdings. investments in biotech firms such
coming a “weightier driver of global as Cytokinetics, Nuvalent and
growth,” Kass says. He thinks it’s ʾʇJanus Henderson Global Regeneron Pharmaceuticals helped.
time for investors to rebalance their Equity Income Looking ahead, manager Ed Yoon
portfolios in favor of EM stocks. Investors gave dividend stocks the is cautiously optimistic and sees lots
cold shoulder last year. Janus Hen- of value in discounted health care
ʾʇBrown Capital Management derson Global Equity Income, which shares. Yoon has beaten his peers in
International Small Company invests in dividend-paying foreign nine of the past 10 full calendar years.
Exceptional small growth compa- stocks, lagged the MSCI EAFE index
nies—firms with a competitive ad- over the past 12 months. “We’re a de- ʾʇT. Rowe Price Global Technology
vantage, a defensible position in their fensive fund, and for the latter half of Since Dom Rizzo stepped in as man-
industry, durable revenue growth the year, the market rally was led by ager in 2022, this fund has moved
and able managers—are this fund’s more economically sensitive stocks,” from the bottom of the pile to the
quarry. Profitability, or near profit- says comanager Ben Lofthouse. top. Its 56% return over the past 12
ability, is a must. “They must fund
their growth from the business, not Coming U.S. interest rate cuts and an
rely on debt markets,” says coman-
ager Duncan Evered. The combina- expected end to a 14-year bull market in the
tion is rare, but the managers typi- U.S. dollar may lift emerging-markets stocks.
cally invest in 40 to 65 foreign firms
with revenues of $500 million or Because foreign firms pay divi- months ranked among the top quar-
less at the time of initial investment. dends semiannually or annually, tile of all tech funds. You can guess
The fund lagged its peers in 2022 the fund managers maximize and what’s behind the turnaround: The
but made up for it over the past 12 smooth out income by buying a stock stocks that are driving market re-
months, when it outpaced the typi- before it pays a dividend and selling turns, including Apple, Microsoft
cal foreign small- and midsize- it a few months later to buy shares in and Nvidia, together make up
company growth fund by more than a similar company before it pays its roughly one-third of the portfolio.
10 percentage points. Since inception dividend. The fund yields a robust “These firms make linchpin tech-
in 2015, the fund has outpaced its 4.2% as a result, but turnover is high. nologies that are mission critical
index, the MSCI All Country World That said, many holdings have been to the success of their customers,”
Index ex US Small Cap, by an aver- in the fund for years, including con- says Rizzo. The companies are also
age of nearly five percentage points sumer products giant Unilever and poised to be big beneficiaries of
per year. chipmaker Taiwan Semiconductor growth in AI. Rizzo is investing in
Manufacturing. And the fund has other exciting innovations in tech,
ʾʇFidelity International Growth outpaced its peers (foreign large- too, including e-commerce, stream-
Fidelity International Growth man- company value funds) in five of the ing and digital payments, but AI is
ager Jed Weiss has been firing on past six full calendar years. arguably the most thrilling because
all cylinders lately. The fund’s 21% it is a “fundamental shift in comput-
return over the past 12 months beat SPECIALIZED FUNDS ing architecture that only comes
the MSCI EAFE index, which tracks around every decade or two.”
large and midsize companies in de- ʾʇFidelity Select Health Care
veloped foreign countries, by more The health care sector has performed ʾʇ[New] Vanguard Wellington
than six percentage points. It also poorly over the past 12 months, gain- What’s old is new again. We cut this
outpaced 87% of its peers (funds that ing 16%, compared with a 30% return low-cost balanced fund in 2022 to

24 Kiplinger Personal Finance

 Investing

make room for a commodity fund Instead, the managers keep the
MODEL PORTFOLIOS
Use the ideas below as a starting point for
as an inflation hedge. With inflation fund’s duration (a measure of inter-
your own portfolio, tweaking it in places
at bay, Vanguard Wellington is back est-rate sensitivity) even with that of
to be more aggressive or more conserva-
on the roster. the Agg index. “Staying the course
tive according to your risk tolerance.
The fund holds 65% of its assets in and not trying to outguess the short-
stocks and 35% in bonds. Dan Pozen term direction of rates is our mind- AGGRESSIVE PORTFOLIO
picks the stocks, investing in durable set and process,” says Pierson. The Time horizon: 11 years or more
businesses with strong future earn- fund yields 4.0%. Strategy: Invest 80% of assets in stocks
ings potential that trade at moderate and add a stable, core bond fund for the
valuations. On the bond side, Loren ʾʇ[New] Dodge & Cox Income remaining 20%.
Moran buys high-quality corporate A team of seven managers work
Mutual fund % of portfolio
debt and Treasuries. Over the past collectively to run Dodge & Cox
12 months, the duo have delivered Income, which invests mostly in Dodge & Cox Income 20
a 17% return, a top-quartile perfor- high-quality U.S. debt. A strong price Dodge & Cox Stock 20
mance relative to peers (moderate- discipline prevails in all decisions. Primecap Odyssey Growth 20
allocation funds). “The starting yield is a key compo- Fidelity International Growth 10
Pozen and Moran had been co- nent of future return, but valuation Heartland Mid Cap Value 10
managers of Vanguard Wellington and security selection are also criti- T. Rowe Price Small-Cap Value 10
with others, but both became solo cal in delivering risk-adjusted total Baron Emerging Markets 5
managers of the stock and bond sides, returns over a long time horizon,” Brown Capital Mgmt. Int. Small Co. 5
respectively, relatively recently— says Lucy Johns, Dodge & Cox direc- 100
Pozen in 2020 and Moran in 2021. tor of fixed income. MODERATE PORTFOLIO
The fund’s record since mid 2021 is Over the past year, the managers Time horizon: Six to 10 years
an annualized 3.4%. That was more bought longer-dated debt to lock in
Strategy: Hold 70% in stocks and 30%
than double the typical return of the higher yields. One effect was to
in bonds for a more temperate mix.
fund’s peers, but it lagged the 4.1% stretch the fund’s duration to six
gain in a composite of the S&P 500 years, its highest in decades. If rates Mutual fund % of portfolio
and the Bloomberg U.S. Aggregate are indeed near or at a peak, the T. Rowe Price Dividend Growth 20
Bond indexes. The fund yields 2.1%. fund should benefit as yields fall Baird Aggregate Bond 15
because prices and yields move in Dodge & Cox Stock 15
BOND FUNDS opposite directions. The managers Fidelity International Growth 15
also took profits in corporate debt, Fidelity Strategic Income Fund 15
ʾʇBaird Aggregate Bond the fund’s best-performing seg- Janus Henderson Glb Eq Income 10
The managers behind this fund aim ment, and invested the proceeds DF Dent Midcap Growth 5
to beat the Bloomberg U.S. Aggregate in bargain-priced Treasuries. T. Rowe Price Small-Cap Value 5
Bond index, and over the fund’s 23- The fund’s 5% return over the 100
history, they have. Since it launched past 12 months ranked among the
CONSERVATIVE PORTFOLIO
in 2000, the Baird fund has returned top 16% of all intermediate core-plus
Time horizon: Five years or less
4.0% annualized, outpacing the Agg’s bond funds. Dodge & Cox Income
Strategy: A steady blend of 65% bonds
3.8% return over the same period. falls in the “core plus” category in
and 35% stocks geared for income.
A 10-person team buys high- part because it has the flexibility to
quality, medium-maturity bonds, invest up to 20% of assets in junk Mutual fund % of portfolio
including Treasuries, asset-backed debt (rated double-B to triple-C or Baird Aggregate Bond 25
or mortgage-backed securities, and lower); these days, 7% of the fund is Fidelity Strategic Income Fund 25
corporate debt, at compelling prices. invested in high-yield IOUs. T. Rowe Price Dividend Growth 15
When uncertainty reigns in any Of course, the fund’s steady long- Vanguard Equity Income 15
particular bond sector, you can bet term record is the ultimate plus. T. Rowe Price Floating Rate 5
they’re looking for opportunities. Dodge & Cox Income boasts a 10-
Vanguard Emerging Markets Bond 5
As commercial mortgage-backed year, 2.4% annualized return that
Vanguard High-Yield Corporate 5
securities dropped in price in 2023, beat 92% of its peers and the Agg
Vanguard Wellington 5
for instance, they were digging for index. A high and stable rate of cur-
100
hidden gems. What they won’t do is rent income is its main objective.
bet on the direction of interest rates. The fund yields 4.6%.

May 2024 25
Investing

ʾʇFidelity Intermediate with a short-term benchmark, may bond group took over one-third of the
Municipal Income seem out of step. But a small position fund’s assets, and longtime Welling-
Municipal bonds, which pay income in these loans can boost stability and ton Management subadviser Michael
that is exempt from federal taxes, yield in a bond portfolio, according Hong took on a comanager, Elizabeth
rallied sharply in late 2023. Fidelity to T. Rowe Price Floating Rate man- Shortsleeve. Then in mid 2023, Hong
Intermediate Municipal Income has ager Paul Massaro. Relative to other stepped down, with little notice.
returned 5% over the past 12 months bond sectors such as corporate debt There are reasons to stay. The
and currently yields 3.1%, or a tax- and emerging-markets bonds, float- fund’s quality bias among junk
equivalent 4.1% for investors in the ing-rate bank loans have been lower bonds—debt rated double-B to
24% federal tax bracket. Three man- in volatility and have offered better triple-C—is one. The portfolio boasts
agers look for well-priced general risk-adjusted returns over any time a double-B average credit quality,
obligation debt—muni bonds funded frame out to 15 years. for instance, which is higher than
by state and local taxes—and revenue We’ll keep an eye on the asset class the average single-B quality of its
bonds, which are IOUs for projects over the coming year, but Massaro peers. “High-quality high-yield debt
such as toll bridges that generate in- runs a tight ship, leading a team of outperforms the rest of the sector
come to pay off the bond holders. The analysts to find quality loans trading over the long term on a total-return
fund is slow and steady: Over the past at a discount. The fund has returned and risk-adjusted-return basis,” says
three years, it has delivered above- 11% over the past 12 months, and it Shortsleeve. She has two decades of
average returns with below-average currently yields 8.7%. high-yield bond experience, includ-
volatility and an annualized return ing 16 years at Wellington, working
that outpaced 82% of its peers. ʾʇVanguard Emerging closely with Hong, who remains at
Markets Bond the firm. We’re sticking with the
ʾʇFidelity Strategic Income Vanguard’s Dan Shaykevich and fund for now and attentive to how
At long last, income has returned to Mauro Favini invest mostly in dollar- it performs. The fund yields 6.5%,
fixed income. That has the managers denominated government debt issued about average for the high-yield
at multisector bond fund Fidelity by developing countries. But they bond fund category.
Strategic Income feeling optimistic. have leeway, too, to invest up to 10% of
Lead managers Ford O’Neil and assets in bonds denominated in local ʾʇVanguard Short-Term
Adam Kramer decide how much of currencies and 10% in emerging- Investment-Grade Bond
the fund to devote to certain sectors, markets corporate IOUs. Last year, This fund’s turf—high-quality short-
staying more or less in line (depend- they leaned into those two debt sec- maturity bonds—has been a popular
ing on their take on the market) with tors, boosting the fund’s returns. spot for investment-grade debt (rated
a benchmark of 45% of assets in high- Over the past 12 months, the fund’s triple-A to triple-B) over the past
yield debt, 30% in U.S. government 12% return beat both its peers and year. Vanguard managers Daniel
issues, 15% in emerging-markets its benchmark. Looking ahead, the Shaykevich and Arvind Narayanan
bonds and 10% in IOUs from devel- managers are wary of corporates make the big-picture decisions;
oped foreign countries. Bond sector at this point in the economic cycle bond-sector specialists pick the se-
specialists pick the securities. but still see opportunity in selective curities. Recently, 87% of the fund’s
Over the past 12 months, the local-currency debt. Overall, says assets sat in corporate debt, much of
fund loaded up on high-yield bonds, Favini, “we believe that emerging- it rated triple-B or single-A, with an
floating-rate loans and cash. It light- markets bonds are going to be quite average maturity of less than three
ened up on foreign developed debt. an attractive asset class this year,” years. The rest is invested in Trea-
The result: An 8% gain over the one- thanks in part to coming interest rate suries and other government debt,
year period, beating 74% of its multi- cuts, a lack of supply in new emerging- with a smattering in foreign bonds
sector bond peers. By contrast, the markets issues and low valuations and asset- or commercial-backed
Bloomberg U.S. Aggregate Bond in- for EM debt relative to other bond IOUs. The fund has returned nearly
dex gained 3%. The fund yields 5.3%. sectors. The fund yields 7.0%. 6% over the past 12 months, which
beat 67% of its peers, but it’s still
ʾʇT. Rowe Price Floating Rate ʾʇVanguard High-Yield clawing its way back from a 6% loss
Now that interest rate cuts are com- Corporate Bond in 2022. The fund yields 5.0%.
ing, a fund that invests in floating- This high-yield bond fund has gone
rate loans, which carry interest rates through key changes in recent years. You can contact the author at
that reset every three months in line In mid 2022, Vanguard’s in-house Nellie.Huang@futurenet.com.

26 Kiplinger Personal Finance

Investing

BUFFETT’S BUYS AND SELLS

Berkshire Hathaway took a bite out of Apple in the fourth quarter.
BY DAN BURROWS

PRINGTIME is are essentially no candidates rallied more than 12% in the

annual meeting that are meaningful options. final three months of last year.
season, and All in all, we have no possibility Berkshire reduced its position
there’s not a of eye-popping performance.” by 10 million shares. And yet,
more anticipated We checked up on Berkshire’s Apple still accounts for 50.2% of
shareholder portfolio moves for the final Berkshire’s total portfolio value,
confab than the one put on by quarter of 2023 via documents up from 50% three months ago.
Berkshire Hathaway in Omaha, filed with the Securities and Buffett is thought to manage
scheduled for May 4. This year’s Exchange Commission. The about 90% of Berkshire’s stock
get-together will be marked by filings, made public in mid Feb- portfolio, with Weschler and
the absence of chairman and ruary, show what Buffett, or Combs handling the remainder.
CEO Warren Buffett’s longtime his co-portfolio managers Ted And Buffett, who has called
partner, Charlie Munger, who Weschler and Todd Combs, Apple Berkshire’s “third busi-
died in November. In his annual were buying and selling as the ness” and its “best business,” is
letter to shareholders, Buffett year came to a close. thought to handle most of the
called Munger the “architect” The move that grabbed the firm’s Apple investments.
of Berkshire Hathaway. At the most headlines was trimming We should note that Buffett
meeting, shareholders will be the firm’s stake in Apple. But the has always run a highly concen-
looking for insight into what’s sales look like an attempt to keep trated portfolio. Berkshire’s top

GETTY IMAGES
next for the 93-year-old Oracle the iPhone maker’s weight in the five holdings make up more than
of Omaha, and the collection of Berkshire portfolio from getting 80% of the portfolio. The top 10
businesses he has accumulated. too far out of whack. Apple stock holdings account for 93%.
In his letter, Buffett high-
lighted additions last year to
stakes in five Japanese conglom-
erates, including Mitsubishi and
Sumitomo, which trade here as
American depositary receipts.
In some ways, “all five compa-
nies follow shareholder-friendly
policies that are much superior
to those customarily practiced
in the U.S.,” Buffett wrote. The
Japanese stock market is trading
at record highs; Berkshire’s gain
in the five firms at year-end to-
taled roughly $8 billion.
But Buffett sought to curb
shareholder expectations in gen-
eral. “There remain only a hand-
ful of companies in this country
capable of truly moving the
needle at Berkshire, and they
have been endlessly picked over,”
he wrote. “Outside the U.S. there

28 Kiplinger Personal Finance

 Investing

Stocks Berkshire is buying. down from 4.6% three months Berkshire cut its shares in en-
Buffett took advantage of weak- earlier—the stock is Berkshire’s tertainment concern Paramount
ness in the energy sector to add sixth-largest position. Global by one-third. The media
to two of his favorite oil stocks. Lastly, Berkshire quadrupled company now accounts for just
Shares in Chevron spent much its ownership of shares in Sirius 0.27% of the portfolio, down
of the fourth quarter trading XM Holdings. However, at just from 0.39% a quarter ago. Para-
below $150 a share. Occidental 0.06% of the portfolio, SIRI re- mount shares tumbled on the
Petroleum, meanwhile, spent a mains an immaterial position. news, down 16% by the end of
good chunk of December below Berkshire initiated a small stake February.
$60 a share. Buffett has tended in Sirius in the third quarter of Finally, in a series of exits,
in the past to pick up shares in 2023. (Berkshire owned SIRI Berkshire sold out positions
the two stocks when they slip before, exiting a small stake in homebuilder D.R. Horton,
below those respective levels, back in 2021.) StoneCo., a Brazilian fintech
so the additions shouldn’t come company, and insurance firms
as too much of a surprise. Stocks Berkshire is selling. Markel—often called a mini
Berkshire upped its Chevron In addition to trimming Apple, Berkshire Hathaway—and Globe
stake by almost 16 million shares, Buffett slashed the portfolio’s Life. D.R. Horton had made up
a 14.4% increase in the number stake in computer hardware just 0.2% of Berkshire’s portfo-
of shares held. With 126 million firm HP by 78%, in terms of the lio; the other three stocks ac-
shares worth $18.8 billion at number of shares. Buffett had counted for less than 0.1%.
the end of 2023, the energy ma- initiated a commanding position For a look at all of Warren
jor is Berkshire’s fifth-largest in the maker of PCs and printers Buffett’s stocks and exchange-
holding at 5.4% of the portfolio back in 2022. At the time, HP traded funds, check out the com-
(down from almost 6% three looked like a classic Buffett value plete holdings at kiplinger.com/
months earlier). play, but it didn’t quite work out. kpf/warren-buffett-stocks.
As for Occidental, Berkshire The stock now accounts for 0.2%
raised its stake by 19.6 million of the portfolio. That’s a sharp For questions or comments,
shares. At 4.2% of the portfolio— drop from 0.84% last quarter. e-mail feedback@kiplinger.com.

Recent Percent 4Q change

BIGGEST BUYS Symbol price of portfolio (percentage points)
BY THE NUMBERS
Sirius XM SIRI $4 0.06% 0.05

BERKSHIRE’S Occidenal Petroleum OXY 61 4.19 –0.45

TOP TRADES Chevron CVX 152 5.41 –0.52

Berkshire Hathaway’s big- BIGGEST SALES

gest buys and sells during HP HPQ $28 0.20% –0.64
the fourth quarter are ranked D.R. Horton DHI 149 0 –0.20
by the change in their weigh-
ting in Berkshire’s portfolio. Paramount Global PARA 11 0.27 –0.12
Top holdings are ranked by Markel MKL 1,492 0 –0.07
their portfolio weighting at StoneCo STNE 17 0 –0.04
year-end.
Some stocks decreased TOP HOLDINGS
(or increased) as a percen- Apple AAPL $181 50.19% 0.15
tage of the overall portfolio
Bank of America BAC 35 10.01 0.98
despite the addition (or redu-
ction) of shares. Top holdings American Express AXP 219 8.18 0.96
are ranked by their portfolio Coca-Cola KO 60 6.79 –0.36
weighting at year-end. Chevron CVX 152 5.41 –0.52

Stock prices as of February 29. Portfolio data as of December 31. SOURCES: Berkshire Hathaway, Securities and Exchange Commission, WhaleWisdom.

May 2024 29
Investing

POLITICAL HEADWINDS, FINANCIAL GAINS

The Kiplinger ESG 20 Update BY KIM CLARK

I
NVESTING strategies that share price two years ago. shareholder governance policies
favor firms with strong Over the past 12 months, our such as an independent board
environmental, social or basket of ESG-friendly stocks has of directors. But last fall, Clorox
governance records continue returned 48%, beating the S&P suffered a devastating cyber-
to generate bitter political con- 500’s gain of a little more than attack, which is a governance
troversies. But recent financial 30%. Even subtracting Nvidia, setback, as well as a reason the
returns have been sweet for which more than tripled in the company expects sales to de-
most of the Kiplinger ESG 20, past year, the remaining 14 stocks cline for the fiscal year ending
the list of our favorite ESG- gained an average of 34%, led by June 30. Of the 22 analysts who
focused stocks and funds. Salesforce’s 89%. (In February, follow the stock, only two rec-
In the six months ending Feb- Salesforce also initiated a quar- ommend Clorox. The company
ruary 29, the period since our terly dividend of 40 cents a share.) has struggled to forge a new
last update, 12 of the 15 stocks on Many non-tech stocks also path to growth as a pandemic-
our list outperformed the S&P soared. Heating and air condi- fueled surge has faded.
500 index, returning an average tioning manufacturer Trane In its place we recommend
of 36%. That’s well above the Technologies, known for an out- Accenture, a global consulting
index’s return of 20% over the standing safety record, returned company considered a leader in
period. (Prices and returns are more than 54%. The only two corporate governance. ISS ESG,
as of February 29.) money losers over the past 12 Since we the sustainable-investment arm
Among the outperformers months were environmental added of ISS STOXX, praises the gen-
were some “magnificent” tech standout First Solar, down 9%, Novo Nordisk der diversity of the board and a
stocks, such as Nvidia, which and Target, down 7%. Target, to our list policy requiring board members
is highly regarded for its labor known for its diversity efforts, last fall, to be reelected each year. The
relations, and Microsoft, which suffered a sales backlash last year it is up firm has received cybersecurity

32%
invests in clean-energy supplies when some customers objected certifications and awards from
for its cloud-computing opera- to displays celebrating gay pride. several entities, including the
tions. Also notable: Novo Nord- International Organization
isk, up 32%. The drugmaker Making a change. We are re- for Standardization, a group
joined the ESG 20 last fall. It moving Clorox from the ESG of 164 national organizations
provides low-cost medicine to 20. It still wins plaudits for pro- that set standards for various
those in need and is profiting
from new anti-obesity drugs.
Levi Strauss, a leader in re-
ducing fashion-industry waste,
has largely languished since
we added it in 2022. But shares
have returned 36% since our
last update, in part due to re-
structuring and cost-cutting
moves. A new CEO took over in
January. The worst performer
since our last update is environ-
mental standout First Solar,
GETTY IMAGES

which lost 5%. For context, con-

sider that the stock nevertheless
trades at more than double its

30 Kiplinger Personal Finance

 Investing

aspects of corporate operations. SUSTAINABLE PICKS

Of the 29 Wall Street analysts
THE KIPLINGER ESG 20 AT A GLANCE
who follow Accenture, 18 expect The stocks and funds below are environmental, social or governance exemplars, while also possess-
it to outperform the broad stock ing solid financial fundamentals.
market. Because Accenture is
a tech consultant but not a tech ENVIRONMENTAL STEWARDS
These companies offer products, services or technologies that provide solutions to problems such
company, investors benefit from
as greenhouse gas emissions, air and water pollution, or resource scarcity.
the growth of artificial intelli-
Price-earnings Annualized total return
gence and other new technolo-
Company Symbol Price ratio 1 yr. 3 yrs.
gies while avoiding much of the
First Solar FSLR $154 11 –9.0% 23.8%
tech industry’s volatility, says J.P.
Levi Strauss LEVI 18 15 4.0 –5.8
Morgan analyst Tien-tsin Huang. Microsoft MSFT 413 35 66.9 21.9
Long-term contracts with compa- Prologis PLD 133 56 10.8 12.9
nies and government agencies Xylem XYL 127 31 25.1 9.5
around the world produce a
steady cash flow, which is an at- SOCIAL STANDOUTS
These companies support their employees, customers and suppliers and treat them fairly, while
tractive defensive quality, he adds.
positively impacting their community and the world at large.
Price-earnings Annualized total return
Mixed bag. Our five ESG funds Company Symbol Price ratio 1 yr. 3 yrs.
produced mixed results. The top Novo Nordisk NVO $120 36 71.0% 50.9%
performer, Putnam Sustainable Nvidia NVDA 791 33 240.8 79.4
Future, beat the S&P 500 with Salesforce CRM 309 32 88.8 12.6
a 34% return over the past year Trane Technologies TT 282 28 54.5 23.8
(28% since our last update). The W.W. Grainger GWW 974 25 46.7 38.7

fund benefited from its holdings

GOVERNANCE LEADERS
in Nvidia and another of our ESG These companies are committed to diverse and independent boards, strong ethics policies,
picks, semiconductor company responsible executive pay that is tied to performance, and combating corruption.
Applied Materials, as well as top Price-earnings Annualized total return
10 holdings Sprouts Farmers Company Symbol Price ratio 1 yr. 3 yrs.
Market, up 106% for the year, and Accenture ACN $375 32 43.3% 15.9%
Chipotle Mexican Grill, up 80%. Applied Materials AMAT 202 25 74.7 20.1
The other funds lagged CBRE Group CBRE 92 22 7.9 6.6
broader market benchmarks. Hilton Worldwide Holdings HLT 204 29 41.8 18.4
Target TGT 153 17 –6.6 –3.5
Brown Advisory Sustainable
Bond eked out a 1.4% gain for ESG FUNDS & ETFS
the year, less than half of the These funds might focus on an ESG category, seek a measurable impact on a specific challenge,
overall bond market’s 3.3% re- integrate ESG criteria into a broader strategy or engage with firms to improve ESG practices.
turn. But the fund has gained Mutual Fund/ Expense Annualized total return
4.6% in the past six months, Exchange-Traded Fund Symbol ratio 1 yr. 3 yrs.
slightly below the 5% return of Brown Advisory Sustainable Bond BASBX 0.52% 1.4% –3.8%
the Bloomberg U.S. Aggregate FlexShares STOXX Global ESG Select Index ESGG 0.42 18.1 8.8
Bond Index over the period. Green Century Balanced GCBLX 1.46 12.1 3.8
Pax Global Environmental Markets PGRNX 1.16 13.7 4.2
Green Century Balanced, with
Putnam Sustainable Future ETF PFUT 0.64 33.6 —
60% of assets in stocks and 40%
in bonds, returned about 12% for INDEXES Annualized total return
both periods. “Bonds serve as bal- 1 yr. 3 yrs.
last during a down market,” says S&P 500 INDEX 30.5% 11.9%
portfolio manager Paul Hilton— BLOOMBERG U.S. AGGREGATE BOND INDEX 3.3 –3.2
but they can be a drag in a strong MSCI ALL COUNTRY WORLD INDEX 23.1 6.8
stock market, he notes. As of February 29. —Fund not in existence entire period.
SOURCE: Morningstar Direct
You can contact the author at
Kim.Clark@futurenet.com.

May 2024 31
Investing Commentary

A 15-Year Win for High Yielders

INCOME INVESTING BY JEFFREY R. KOSNETT

HIS spring marks solvent. Ares now trades at $20 and

15 years since fi- over this time has paid cumulative
nancial markets dividends of $23.67 a share, driving
escaped the Great its total return (dividends reinvested)
Recession to shower to 2,654%. Ares delivered this for-
the world with tune while maintaining a constant
long-term returns that read like mis- dividend yield around 9%. If you
prints: Apple, up 5,608%. Amazon, bought 15 years ago, today’s $1.92
up 4,616%. Microsoft, up 3,511%. annual dividend gives you almost
QQQ, Invesco’s giant Nasdaq 100 a 50% yield on your original cost.
exchange-traded fund, up 1,843%. Ares shareholders thus won big
(Returns are through late February.) whether they took the cash to pay
In this epic bull market, scores of bills or rolled the money into more
very-high-distribution investments, shares. Either idea works fine today.
from master limited partnerships to The same is true of various Pimco
well-managed leveraged closed-end funds. The firm’s glittering gems are it has also kept its NAV between $4
funds to high-rate lenders, have paid its high-distribution diversified and $5 for 15 years (except for a brief
tremendous and dependable interest closed-end offerings, highlighted by period early in the pandemic). Con-
and dividends while maintaining or Pimco Corporate & Income Oppor- sequently, while the excellent Fidel-
building share prices and net asset tunity (PTY) and Pimco Corporate & ity Floating Rate High Income fund
values. This contravenes the fallacy Income Strategy (PCN). Not only are has a 124% return over the past 15
that anything normally priced to the former’s 15-year return of 1,484% years, Invesco’s offering did 545%, or
pay 10% (or close to it) is an incipient and the latter’s 1,114% huge, but their 11.7% annualized. Yes, leveraging is
disaster reliant on accounting leger- net asset values and share prices supposed to magnify losses, but the
demain, uses excessive returns of more than doubled while distribu- fund’s few setbacks cost it just 4% or
capital to fabricate bogus “yield” tions remained around 10%. Given so in any calendar year, not the 20%
or is a lottery ticket that rewards a the wide risk-taking leeway Pimco that critics presume is in the offing
fortunate few but beggars the many. accords its fund managers, and de- for these types of investments when-
In fact, the total returns of a sub- spite the gyrations in so many high- ever the markets stumble.
stantial cohort of high-payout funds, paying asset classes, it is remarkable I could go on about pipelines and
trusts and partnerships are up there that both funds’ share prices have enhanced high-dividend stock
with the titans. Start with Ares Cap- tracked between $13 and $20 for a funds. ONEOK (OKE) has a 15-year
ital (symbol ARCC), the best of the decade and a half. gain of 2,057%; Eaton Vance Tax-
business development companies, Invesco Senior Income Trust Advantaged Dividend (EVT), 990%.
which extend high-interest-rate (VVR), a leveraged bank-loan CEF, is And one more thing: Since 2009,
credit to diverse small and midsize another high-distribution gold med- iShares iBoxx $ High Yield Corpo-
businesses. On March 9, 2009, Ares alist. While regular bank-loan funds rate Bond (HYG), the largest high-
traded at just below $4 a share, sur- pay out 5% or so, Invesco’s formula yield-bond ETF, boasts a 207% re-
viving the recession bloodied but lets this fund distribute 12%, and yet turn, or 7.2% annualized. Vanguard
Total Bond Market Index (BND),
In an epic bull market, scores of high- with a focus on investment-grade
IOUs, is up a mere 46%, or 2.5% an-
yielding investments have paid tremendous
PHOTO BY BOB CROSLIN

nualized. Yield rocks. Case closed.

and dependable interest and dividends. Jeff Kosnett is editor of Kiplinger

Investing for Income. You can reach
him at Jeff.Kosnett@futurenet.com.

32 Kiplinger Personal Finance

 Investing

BEYOND THE MAGNIFICENT SEVEN

Nvidia dazzled investors once again. But other stocks deserve some love.
STOCK SPOTLIGHT BY ANNE KATES SMITH

N
OT since the market’s Beginning of the end of an era? Leaders Stay on Top?” April).
obsession with The Magnificent Seven (Nvidia But opportunities elsewhere
GameStop, the first plus Apple, Alphabet, Amazon might finally have a chance to
of the “meme” stocks, have the .com, Meta Platforms, Microsoft shine in the latter half of 2024.
fortunes of a single company— and Tesla) accounted for the bulk If corporate earnings are truly
Nvidia (symbol NVDA)—so cap- of broad-market gains in 2023, the engine that drives the stock
tivated investors. Except the using the S&P 500 index as a market, then by this fall, the rest
stakes are much higher with benchmark. Even if you don’t of the market should begin to
Nvidia, the manufacturer whose own the individual stocks, you gain ground. BofA looked at
semiconductor chips power the may well be invested in some earnings forecasts for the S&P
artificial intelligence revolution of the Mag Seven, as they are 500 compared with those for the
and whose stock is one of the top holdings in many growth- “S&P 493,” or the S&P 500 mi-
mega-cap market movers known focused and S&P 500 index funds. nus the Magnificent Seven. For
as the Magnificent Seven. With far loftier profit-growth the first quarter of 2024, com-
The Nvidia juggernaut rolled expectations than the rest of the pared with the same quarter in
through the market again in market, the Magnificent Seven 2023, analysts forecast average
February when the company re- are “priced for forever perfec- profit growth of 37% for the
ported blockbuster results for its tion,” according to Savita Subra- Magnificent Seven, compared
fourth quarter, which ended in manian, head of U.S. equity and with a 1% decline for the rest of
January. Revenue was up 265% quantitative strategy at BofA. the S&P 500. But by the fourth
compared with the same quarter But just as yesterday’s memes are quarter, the profit laggards
a year earlier; earnings per share now memories, the Magnificent should pull ahead, with analysts
jumped 765%. The stock price Seven’s extreme dominance of expecting 12% growth for the
rose 16% on the day after the re- the market might be coming to Mag Seven and 14% growth for
port, pulling other chip makers an end. That doesn’t mean these the remainder of the S&P 500.
up with it. At the end of Febru- innovators don’t have much to To broaden your portfolio,
ary, Nvidia traded at $791, re- recommend them still, as BofA’s Subramanian suggests high-
turning 60% so far in 2024 on bullish take on Nvidia shows yielding dividend stocks, which
top of 239% in 2023. (also see “Will These Market are “unloved and cheap” but
“Nvidia delivered against have good prospects, she be-
what was seemingly a very lieves. To see what makes a good
37%
high bar,” said analysts at Gold- DAVIDS dividend stock, see “Practical
man Sachs in a note to clients VERSUS Portfolio,” on page 60.
following Nvidia’s earnings re- GOLIATHS
port. The analysts raised their Estimated You can contact the author at
12-month price target on the 2024 quarterly 22% Anne.Smith@futurenet.com.
shares to $875, up from $800 earnings
prior to the earnings release.
Analysts at BofA Global Re- Magnificent 7 14%
12% 12%
search, noting that “AI demand Remainder of
is surging against multiple cus- S&P 500 7% 7%
tomer sets,” raised the firm’s -1%
target price on Nvidia shares
1Q 2Q 3Q 4Q
from $800 to $925.
SOURCES: FactSet, BofA Global Research

May 2024 33
Investing Commentary

Investing in Big Ideas

STREET SMART BY JAMES K. GLASSMAN

VER since my going to make any money. That’s

daughter intro- how radical our idea is.’ ”
duced me to the No profits ever? That may be going
TV show Shark too far, but the point is that real ven-
Tank, I’ve been ad- ture capitalists care more about the
dicted. Now in its idea than about proof, or even pro-
15th season, Shark Tank features en- jections, of earnings. As a small in-
trepreneurs making pitches to four vestor, you need the same frame of
real-life investors, who bid to put up mind if you want to be your own
their own money in a fledgling busi- VC. So forget price-earnings ratios
ness. I’ve even been known to buy or cash flow analyses and ask your-
the products. You should see my lit- self whether the company is backed
tle red book that opens into a glori- by a Big Idea.
ous flood of light, not to mention Here’s one: Netflix—my single best
my torpedo-shaped glasses-cleaner. stock call ever. In December 2003,
But something bothers me about seven months after the stock’s initial million subscribers, and profits last
Shark Tank. The investors are not public offering, I wrote in the Wash- year were $5.4 billion. I bought the
nearly bold enough. They ask about ington Post: “I read about Netflix— stock in March 2003 at a price, ad-
current sales and profits. They want I still don’t remember where—and justed for splits, of less than $2 a
too many assurances. In short, they realized at once that it was a brilliant share. Netflix currently trades at
aren’t real venture capitalists, who idea.” You paid a flat monthly fee of $603. Unfortunately, I sold after my
thrive on risk. They sound more like $20 to rent all the movies you wanted shares tripled. Knowing when to get
bankers. from a library of 15,000 titles. Back out of a Big Idea stock isn’t easy, but
The podcast “Freakonomics” did then, the films arrived in the mail on the default is never. (Prices are as
a deep dive on venture capitalism disks, which you mailed back when of February 29; stocks I recommend
in 2021, interviewing Vinod Khosla, done. So clunky! I had no inkling that are in bold.)
a VC with early-stage investments Netflix would distribute video on-
in Doordash, Square and dozens of line or make its own Oscar-winning Small-scale ventures. Investing in
others. “I don’t mind a 90% chance movies. I liked the original idea and the stock market, you can’t be a real
of failure,” he said, “if the conse- wanted to become a partner with a VC because you can’t get in on the
quences of success are consequen- company this smart and daring. ground floor. But you can put, say,
tial.” Jonathan Levy, of the University Before the IPO, Netflix had gone 10% of your portfolio in listed busi-
of Chicago, went even further: “You without earnings for five years, and nesses with less regard for current
could never tell the VC guys you’re it had 600,000 subscribers. I did financial results than for what Hol-
going to be profitable in three years. some back-of-the-envelope computa- lywood calls high concept—a simple,
I mean, anyone who actually says tions and concluded that, with 2 mil- yet compelling premise like Jurassic
they’re going to be profitable obvi- lion subscribers, Netflix could make Park (dinosaurs run amok at a re-
ously doesn’t have a bold enough a tiny profit. I wasn’t thinking as big mote theme park).
idea. You’ve got to say, ‘We’re never as a real VC. Today, Netflix has 260 The best idea-driven stocks are
high concept as well. Think of FedEx:
Venture capitalists care more about the idea Get your urgent papers and packages
overnight. Or Amazon.com (symbol
than profits. If you want to be your own VC,
PHOTO BY NOAH WILLMAN

AMZN, $177): Buy practically any-

you need to have the same frame of mind. thing online and have it delivered
free in a day or two. Or Lululemon
Athletica (LULU, $467): yoga clothes
for all occasions.

34 Kiplinger Personal Finance

 X E S N G
TA S T I N G
V E D I
I N E N
SP I N G
T E N D
E N & L
R E M I T
ET I R E D
R C SS
I N E
S
BU

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more of the money you make!
Whatever your personal finance need,
there’s a Kiplinger e-newsletter to help.

Choose yours today — FREE — and reach your financial goals.

my.kiplinger.com/email
Investing Commentary

Even for Big Idea companies, the

road can be rocky and patience nec-
For a short time, I owned both Lyft
essary. Consider Uber Technologies and Uber. But it quickly became clear
(UBER, $80). The stock went public
in 2019 at $45 a share and quickly that Uber was the stronger company.
went south. At the end of 2022, it
was trading at $30. Uber suffered
from regulatory obstacles, COVID-19,
high gas prices, crimes by drivers end of its first day of trading five daily wear, On Holding (ONON,
and competition from Lyft. Uber years ago, Lyft traded at $78 a share; $35), has a Big Idea: a subscription
didn’t even make a profit until last today, it’s $16. service that appeals to the environ-
year—and a modest one at that. mentally concerned. You pay a set
But Uber’s high concept is now An AI play. Other Big Idea stocks to monthly fee and get new shoes every
clearly winning, and the company consider? Few pure, publicly traded six months (or earlier if they’re worn
carries a market capitalization (price artificial intelligence plays are avail- out), sending back your old ones for
times shares outstanding) of $165 able right now. OpenAI, originator recycling. Shares have doubled since
billion, making it more valuable than of ChatGPT, is unlikely to go public December 2022, but they still trade
American Airlines, United Airlines, anytime soon (if ever), and some of below their September 2021 IPO.
General Motors, Ford and Hertz the best AI innovation is submerged The consensus of analysts is that
Global combined. With imagination within huge firms such as Microsoft revenues will rise about 30% this
and flexibility, Uber has expanded and Alphabet. year and earnings will rise 50%.
into food delivery, logistics, scooters, But a good choice is Snowflake BBB Foods (TBBB, $21), which
bicycles and rental cars. Just as Net- (SNOW, $188). Its cloud-based soft- had its IPO on the New York Stock
flix leveraged new technology by ware swiftly arranges all of a com- Exchange in February, owns a chain
shifting to video delivery by internet pany’s data to take advantage of AI of more than 2,000 small grocery
rather than the U.S. Postal Service, analytics. The stock took a big hit stores in Mexico. The Big Idea here
so Uber will certainly move into au- in late February when its revenue is that in a time of rising food prices,
tonomous vehicles. guidance for fiscal 2025—a 22% BBB offers a limited assortment of
For a short time, I owned both Lyft increase!—was lower than expected groceries, nearly half with its own
and Uber, which went public almost and its CEO announced he would re- label, at very low prices. Revenue
simultaneously, but it quickly be- tire. Still, sales are up fourfold since is growing at a 34% annual rate.
came clear that Uber was the stron- Snowflake went public in Septem- Another high-concept stock that
ger company. Lyft still isn’t profit- ber 2020, and the company should recently went public is Fractyl
able, and its revenues are less than make a profit this year. Consider the Health (GUTS, $9), which provides
half those of Uber. The stock has plunge a buying opportunity. innovative therapies, focused on
been a disaster—and a warning of A Swiss maker of bouncy running the gut, for diabetes and obesity.
how risky Big Ideas can be. At the shoes and lightweight trainers for The best Big Idea stocks of the
future haven’t yet had their IPOs.
Stay on the alert for them by reading,
stalking the malls, and talking to
friends and the sharpest business
minds you can find.

James K. Glassman chairs Glass-

man Advisory, a public-affairs
consulting firm. He does not write
about his clients. His most recent
book is Safety Net: The Strategy
for De-Risking Your Investments
in a Time of Turbulence. Of the
GETTY IMAGES

stocks mentioned here, he owns

Uber and Lululemon. You can reach
him at JKGlassman@gmail.com.

36 Kiplinger Personal Finance

 Investing

TECH STAYS ON TOP WHILE SMALL CAPS STRUGGLE

KIPLINGER ETF 20 UPDATE BY NELLIE S. HUANG

T
HERE were few surprises among the
Kiplinger ETF 20, the list of our favor- KIPLINGER ETF 20: VITAL STATISTICS
ite exchange-traded funds, in a checkup
Annualized
we intend to do more regularly. But the perfor- total return
Expense
mance of a few funds calls for explanation. Core Stock Funds Symbol Price 1 yr. 3 yrs. 5 yrs. Yield ratio
iShares Core S&P Small-Cap ETF, for in- iShares Core S&P 500 IVV $510 30.3% 11.8% 14.7% 1.4% 0.03%
stance, gained 6%, trailing the 10% climb in
iShares Core S&P Mid-Cap IJH 58 13.0 6.6 10.3 1.6 0.05
the popular Russell 2000 benchmark. The
iShares Core S&P Small-Cap IJR 107 6.4 2.2 7.7 1.8 0.06
fund tracks a different index, however: the S&P
iShares MSCI USA ESG Select SUSA 106 25.8 9.5 14.4 1.3 0.25
SmallCap 600, whose biggest constituent has
Vanguard Total International
a $6 billion market value. The Russell index’s VXUS 59 12.7 1.5 5.7 3.2* 0.07
Stock
largest company has a $27 billion market value,
and bigger did better last year. Dividend Stock Funds
Our recommended U.S. dividend-stock funds Schwab US Dividend Equity SCHD $78 8.1% 8.4% 12.2% 3.5% 0.06%
diverged in performance over the past year. Vanguard Dividend
VIG 178 19.8 10.7 12.5 1.8 0.06
Vanguard Dividend Appreciation gained 20%; Appreciation
WisdomTree Global ex-US
Schwab U.S. Dividend Equity, just 8%. That’s DNL 38 13.7 2.1 9.4 2.1 0.42
Qual Div Growth
mostly because growth stocks have trumped
value shares. Companies that consistently raise Strategic Stock Funds
their payouts, the Vanguard fund’s focus, tend Industrial Select Sector SPDR XLI $121 22.0% 11.9% 11.6% 1.4% 0.09%
to be high-quality firms with growing profits. Invesco S&P 500 Equal Wt
RSPH 31 8.4 6.6 10.0 0.6 0.40
The Schwab fund’s stomping ground is high- Hlth Care

yielding, value-tilting dividend stocks. JPMorgan US Quality Factor JQUA 52 31.5 14.3 15.0 1.3 0.12

JPMorgan U.S. Quality Factor beat the S&P SPDR® S&P Kensho New
KOMP 46 10.0 –10.4 9.1 0.9 0.20
Economies Composite
500 over the past 12 months. Much of the credit
Technology Select Sector
goes to its four top holdings—Nvidia, Meta Plat- XLK 207 52.9 17.6 25.2 0.7 0.09
SPDR
forms, Broadcom and Eli Lilly—which more Vanguard FTSE Europe VGK 65 12.9 5.5 7.4 3.1* 0.09
than doubled in price over the period. The in-
dex fund holds 240 stocks in the Russell 1000 Core Bond Funds
that score best on traits focused on profitabil- Fidelity Total Bond FBND $45 4.4% –2.2% 1.6% 5.2% 0.36%
ity, financial risk and earnings quality. Invesco BulletShares 2026
BSCQ 19 5.4 –1.1 2.9 5.1 0.10
Corp Bd ETF
None of the funds did better than Technology
SPDR DoubleLine Total Return
Select Sector SPDR ETF, up 53%. It holds all TOTL 40 3.5 –2.6 0.1 5.6 0.55
Tact ETF
of the tech stocks in the S&P 500, including
Microsoft and Apple, weighted by market value. Opportunistic Bond Funds
Invesco Optimum Yield Diversified Com- BlackRock Ultra Short-Term
ICSH $50 5.7% 2.5% 2.3% 5.4% 0.08%
Bond
modity Strategy No K-1 ETF, which was added
Invesco Senior Loan BKLN 21 10.1 4.2 3.7 8.2 0.65
as an inflation hedge, has struggled as inflation
rates have started to normalize. We’re replacing Vanguard Tax-Exempt Bond VTEB 51 5.3 –0.1 1.9 3.3 0.05

it with Industrial Select Sector SPDR ETF, Indexes

which holds the 78 industrial stocks in the S&P
S&P 500 30.5% 11.9% 14.8% 1.4%
500. Wells Fargo Investment Institute names in-
MSCI EAFE 14.4 4.4 6.8 3.0
dustrials a top sector for 2024. Analysts at BofA
Bloomberg U.S. Aggregate Bond Index 3.3 –3.2 0.6 4.9
Global Research see higher capital spending on
manufacturing, a boon for the sector.
AS OF FEBRUARY 29, 2024. *12-MONTH YIELD (ALL OTHER YIELDS ARE 30-DAY
SEC YIELDS). SOURCES: MORNINGSTAR DIRECT, MSCI, S&P DOW JONES INDICES,
Reach the author at Nellie.Huang@futurenet.com. WSJ.COM.

May 2024 37
 MONEY

11 WAYS TO

38 Kiplinger Personal Finance

 Whether you’re taking the Pay what you can. Set up an auto-
matic transfer to your account—even

first steps to increase your if it’s $10 every paycheck or once a

month, if that’s all you can afford—

wealth or protecting the assets and invest it. Can’t swing $700-plus
for a share of Nvidia stock? Thanks

you’ve accumulated, our to fractional trading, you can buy a

portion of a share. Although not every

advice will help you flourish. firm offers fractional-share trading,

you can buy fractional shares of
stocks (and exchange-traded funds,
too, in some cases) at Fidelity, Inter-
active Brokers, Robinhood, Schwab,
SoFi and M1 Finance, to name a few.
The minimum amount required for
each trade and the number of stocks
and/or ETFs available for fractional
trades may vary by firm. At M1 Fi-
nance and Robinhood, you can buy
fractions of ETFs and stocks for as
little as $1; at SoFi, it’s $5. At Schwab,
the minimum trade is $5, but only
S&P 500 stocks—no ETFs—are avail-
able. Fidelity and Interactive Brokers
allow fractional-share trading for
any U.S.-listed stock or ETF for as
little as $1.

Automate investing. At Fidelity and

Interactive Brokers, you can set up a
recurring investment in a stock or an
ETF. (Fidelity allows this for mutual
funds, too.) The process is much like
your 401(k) contribution, and it can
take your wealth-growing ability to
INVESTING: THINK BIG, a whole new level. “It’s a great way
START SMALL for people to build a portfolio in a
The best way to turn $100 or $1,000 disciplined way,” says Rob Garfield,
into, well, more, is to invest it. But of Interactive Brokers.
too often, people fall into a trap of The service is free at both firms,
thinking that you need to have a and you can choose how often you
lot of money to invest. Not true. It’s want to invest—weekly, biweekly
okay to start small, but you must or monthly. The minimum for a
be methodical about it. Fortunately, recurring investment is $10 at Inter-
it’s getting easier to do that. Begin active and $1 at Fidelity. Both firms
by following the steps below. will let you set up either a single or
multiple recurring investments.
Start with no money down. Most Trades in stocks and ETFs are made
brokers, including Charles Schwab, during the trading day (although
Fidelity, E*Trade and Merrill Edge, both firms say they try to avoid vola-
GETTY IMAGES

have stopped requiring a minimum to tile periods at the market’s open and
open a brokerage account. It takes just close); mutual fund investments are
minutes to open an account online. after the close.

May 2024 39
Money

Interactive’s recurring-investment
services have only been around since
Wealthy people are often among
late 2022, and Fidelity launched re-
curring investments in stocks and
the most frugal, and they apply
ETFs in late 2023 (though the bro- that cost-consciousness to their
investment portfolios, too.
kerage’s automatic mutual fund
investments have been available
for years). But they’re popular.
“We’ve seen a significant uptick” for example, compared with large, culations from Bankrate. Fund B is
in adoption, especially among young- easily traded blue chips. similar, with identical returns but
ish customers, says Josh Krugman, But when comparing funds in expenses of just 0.5%. After 40 years
Fidelity’s head of core brokerage. the same category, a lower expense you’d have paid just $20,974 and
NELLIE HUANG ratio can make a world of difference. you’d walk away with $370,365, a
The average expense ratio for stock difference of $123,104.
KEEP AN EYE ON mutual funds at last report was Sales charges, too, can pinch fund
INVESTMENT COSTS 1.12%—and 0.54% for stock index investors. But these days, you can
Wealthy people are often among the funds—according to the Investment find plenty of so-called load funds
most frugal, and they apply that cost- Company Institute. For actively offered without a sales charge at
consciousness to their investments, managed exchange-traded stock popular investing platforms, so it
too. The difference between what funds, expenses averaged 0.68%; pays to check before you buy. For
you earn in an expensive fund, for for index-based stock ETFs, 0.46% example, the “A” shares of Columbia
example, compared with an inex- Say you put $10,000 in Fund A, Seligman Technology and Informa-
pensive one can mount to six figures with an annual expense ratio of tion, a fund with impressive long-
over an investing lifetime. Of course, 1.5%, or $150 on a $10,000 invest- term results, carry a 5.75% sales
you’ll pay more in fees for an actively ment. If your fund returned an an- charge. But you can buy the fund
managed fund than for an index- nualized 10% (roughly the long-term load-free (and for no transaction fee)
tracker, and for asset classes that return for large-company stocks) at Fidelity and Schwab. Roughly half
require a higher level of research over a 40-year period, you’d have of the 4,500 no-load, no-fee funds
or trading skills—small-company paid $46,884 in fees and you’d have available on Schwab’s OneSource
stocks or emerging-market shares, a total of $247,261, according to cal- list allow for front- or back-end
loads, but any such charges are
waived on Schwab’s platform, says
a spokeswoman. ANNE KATES SMITH

BE A SUPER SAVER
While “The Secrets of Super Savers”
would be a catchy name for a reality
TV show, there’s really no mystery
to developing good savings habits.
Ideally, you need to monitor your
spending, start setting aside savings
early, put your savings on autopilot
and take advantage of all the tax
breaks and other incentives available
to you. In a 2022 survey of investors’
savings habits, Principal Financial
Group identified super savers as
those who set aside 15% or more of
their salary in retirement accounts
or make 90% of the maximum con-
GETTY IMAGES

tribution allowed by the IRS.

A common characteristic among
the super savers is consistency. Most

40 Kiplinger Personal Finance

 Money

started saving in their teens or early ing news about young adult savers. However, if you want to be a super
twenties and consider it part of their The ICI’s analysis found that in saver, you should put aside even more
identity. They drive older vehicles 2022, members of Generation Z— than the default contribution em-
and own modest homes, which they typically defined as individuals born bedded in your employer’s plan. In
fix up and clean themselves. In addi- between 1997 and 2012—had two 2024, you can stash up to $23,000 in
tion to contributing to 401(k) plans and a half times more assets in re- 401(k) and other employer-sponsored
or other employer-sponsored ac- tirement plans than Generation X plans, or $30,500 for workers 50 and
counts, they take advantage of other households had when they were older. Contributions are tax-deferred
vehicles such as brokerage accounts, the same age (Gen Xers were born if you invest in a traditional 401(k).
health savings accounts and 529 between 1965 and 1980). With a Roth 401(k), contributions
college-savings plans. (For more on Contributing to the trend is the rise are after-tax, but withdrawals are
529s, see “Basics,” on page 64; for in automatic enrollment, according to tax-free in retirement.
more on HSAs, see the box on page the ICI. More than three-fourths of Your employer-provided plan isn’t
47.) “They’re continually looking for large companies automatically enroll the only implement in your retire-
as many ways as possible that they workers in their 401(k) plans. Work- ment toolkit. More than half of Prin-
can save,” says Heather Winston, di- ers who don’t want to participate can cipal’s super savers also contributed
rector of individual investor prod- opt out, but most don’t. Starting in to a Roth IRA, which provides tax-
ucts and solutions for Principal. 2025, companies with new 401(k) free income in retirement (more on
When you’re starting out, finding plans will be required to automati- trimming your taxes below). In 2024,
room in your budget to save for re- cally enroll workers at a minimum you can make the maximum contri-
tirement can be a challenge. But re- contribution rate of 3% and increase bution of $7,000 to a Roth—$8,000 if
cent research from the Investment participation by one percentage you’re 50 or older—if your modified
Company Institute offers encourag- point each year, up to 15%. adjusted gross income (your adjusted

Give Your Heirs a Leg Up

While you shouldn’t let about $7 million for a primary and secondary ums. If you’re 73 or
the desire to leave an single person or $14 mil- school through college. older, it will also count
inheritance jeopardize lion for a couple. And If you’re 70½ or older, toward your required
your own financial secu- several states have much you can also reduce the minimum distribution.
rity, there are steps you smaller exemptions (Ore- size of your estate—as Review beneficiaries
can take to shelter your gon, for example, taxes well as cut your current for your life insurance pol-
estate from federal and estates valued at more tax bill—by making a icies, bank accounts and
state taxes while in- than $1 million). qualified charitable dis- retirement savings plans
creasing the amount Giving away money tribution from your IRA. to make sure they reflect
available for your heirs while you’re still alive is In 2024, you can transfer any recent life changes.
and favorite charities. one of the best ways to up to $105,000 from You should also review
In 2024, up to $13.61 reduce the size of your your traditional IRA to your will or living trust and
million in assets is ex- estate. In 2024, you can qualified charities. The update it to reflect any
empt from estate tax, or give away up to $18,000 contribution isn’t de- changes in your assets.
up to $27.22 million for (or $36,000 as a married ductible, but in addition Make sure you have des-
a married couple. But if couple) to as many peo- to shrinking the size of ignated a power of attor-
Congress fails to extend ple as you’d like without your IRA, it will reduce ney for your finances
provisions of the 2017 filing a gift tax return. You your adjusted gross in- and a health care proxy.
Tax Cuts and Jobs Act can give away even more come, which could lower These individuals will be
before they expire on money tax-free by making your federal and state empowered to manage
December 31, 2025, the direct payments to cover taxes and shield you your money and make
exemption will drop to a beneficiary’s medical from the surcharge that decisions on your behalf
half of that amount, on an bills or tuition at any high-income individuals should you become inca-
inflation-adjusted basis— grade level, from private pay on Medicare premi- pacitated. SANDRA BLOCK

May 2024 41
Money

gross income with certain deductions disruption from economic swings, eligible for the American Opportu-
added back) is less than $146,000 if such as travel and hospitality, you nity Credit. This tax credit is avail-
you’re single or $230,000 if you’re may need to set aside up to 12 months’ able for up to $2,500 of college tuition
married and file jointly. worth of expenses. and related expenses (but not room
If all of this sounds like a bridge The money should be invested in and board) paid during the year.
too far, don’t overlook savings in- an easily accessible savings account Meanwhile, reducing taxes on in-
centives offered by Uncle Sam. The or money market deposit account be- vestments in your brokerage account
Retirement Savings Contributions cause this is money you can’t afford is a surefire way to increase your
Credit, better known as the Saver’s to risk losing. Recently, you could profits or minimize losses. Start by
Credit, is designed to encourage earn up to 5% on top-yielding sav- understanding the difference be-
people with low and middle incomes ings accounts, although those rates tween long- and short-term capital
to begin building retirement nest could decline if the Federal Reserve gains. You’ll pay long-term capital
eggs. Eligible taxpayers can claim a starts cutting rates this year. For gains tax on income from the sale
tax credit of up to $1,000 for single more on top-yielding accounts, turn of assets that you’ve held for more
filers or $2,000 for married couples to page 52. SANDRA BLOCK than a year, at rates ranging from
who file jointly. The credit is based on 0% to 20%, depending on the amount
10%, 20% or 50% of the first $2,000 CUT YOUR TAX BILL of your taxable income. If you sell
($4,000 for joint filers) contributed Taxes, according to the late Supreme stocks, mutual funds or other assets
to retirement accounts, including Court Justice Oliver Wendell Holmes you purchased a year ago or less, the
401(k)s, traditional IRAs and Roth Jr., are what we pay for a civilized net proceeds will be taxed as ordi-
IRAs. If you qualify, the lower your society. But that doesn’t mean you nary income, with rates ranging
from 10% to 37%.
Even if you don’t itemize Clearly, you’re better off selling
investments you’ve owned for more
deductions, you may still be than a year, particularly if you qualify
for the 0% tax rate. In 2024, you’re
eligible for a long list of tax credits eligible for the 0% tax rate if you’re

and above-the-line deductions.

single and have taxable income of
up to $47,205, or up to $94,050 if
you’re married and file jointly. This
income, the higher the percentage of should pay more than you’re legally tax break can be particularly valu-
retirement plan contributions you’ll required to remit to federal and state able to retirees who may need to sell
get back on your tax return. For the tax authorities. Unfortunately, the tax assets to meet expenses and are no
2024 tax year, single filers and mar- code has become more complex, in- longer earning income from a job.
ried people filing separate returns creasing the risk that you’ll overlook Where taxes and your wealth are
with adjusted gross income of money-saving tax breaks. concerned, you need to be thinking
$38,250 or less may be eligible for Start by reviewing how much tax about how much you’ll pay in the
the credit. Married couples filing was withheld from your paychecks future, too. Contributions to a 401(k)
jointly must have AGI of $76,500 or in 2023. If you received a big refund, or deductible IRA will reduce your
less, while head-of-household filers adjust your withholding so that less tax bill now, but the money will be
must have AGI of $57,375 or less. of your paycheck goes to the IRS. taxed when you take withdrawals—
Use the extra money to bulk up your possibly at a higher tax rate than
Fund your bad-news account. Even emergency savings, pay off high- you’re paying today.
the best-laid plans for a secure retire- interest debt, and/or increase con- For that reason, many financial
ment can be derailed by unemploy- tributions to your retirement plans. planners recommend directing at
ment, a serious health condition, or a The majority of taxpayers claim least some of your contributions to a
natural disaster. To avoid tapping the the standard deduction. But even if Roth 401(k), if your employer offers
money you’ve saved for retirement, you don’t itemize deductions, you one (about 75% of large employers
you should have an emergency sav- may still be eligible for a long list do). As is the case with Roth IRAs,
ings account that covers three to six of tax credits and above-the-line contributions are after-tax, but with-
months’ worth of expenses. If you’re deductions. For example, if you have drawals will be tax-free after you’re
the sole wage earner in your house- a child who will start college this 59½ and have owned the Roth for
hold or work in an industry prone to fall, there’s a good chance you’ll be at least five years. Unlike Roth IRAs,

42 Kiplinger Personal Finance


 
      
      
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Money

however, there are no income lim- have the option of waiting until year won’t accrue any interest, and those
its—anyone with earned income can 10 to deplete the account, which savings could easily outweigh the
contribute to a Roth 401(k). means they’ll be able to enjoy more cost to transfer. Make a plan to pay
than a decade of tax-free growth. S.B. off the balance during the 0% inter-
Your taxable legacy. Contributing to est period; after it closes, the interest
a Roth—whether it’s through a Roth PAY OFF DEBT rate will jump up, usually to the
IRA or Roth 401(k) or by converting If you have high-interest-rate debt, credit card’s standard rate.
money in a traditional IRA to a paying it off should be high on your Balance-transfer offers like these
Roth—could also benefit your heirs, priority list because it drags down on are usually limited to those with a
assuming you have funds remaining your ability to create wealth. Credit FICO credit score of 670 or higher.
in your retirement savings accounts card debt is particularly burdensome For example, those with a strong
after you die. And recent changes in because rates tend to run high, and credit score can get 0% interest for 21
the law will make inheriting a Roth they’re variable, moving upward months by transferring their balance
even more valuable. when the Federal Reserve boosts to the U.S. Bank Visa Platinum card.
Before 2020, adult children and
other non-spouse heirs who inher-
ited a traditional IRA or 401(k) could
take withdrawals based on their life
expectancy, allowing the funds to
grow tax-deferred for decades. But
legislation enacted in 2019 requires
non-spouse heirs who inherited a
traditional IRA in 2020 or later to
deplete the account within 10 years
after the death of the original owner.
In addition, in early 2022, the IRS
released guidance stating that if the
original IRA owner died on or after
the date he or she was required to
take minimum distributions, non-
spouse heirs must take RMDs based
on their life expectancy in years one
through nine and deplete the bal-
ance in year 10. (Individuals who in-
herit an IRA before the original
owner was required to take RMDs
can wait until year 10 to deplete the short-term rates. Average rates for If you don’t qualify for a generous
account.) The IRS waived that re- currently held credit cards rose from balance transfer offer, try asking for
quirement in 2021, 2022 and 2023, 16.17% in March 2022 to 24.59% in a better deal on your current card.
but as of press time it hadn’t issued February 2024. More than three-fourths of card-
guidance for 2024. Start by reviewing your credit holders who asked their issuer for a
Requiring heirs to take annual card statement to find out the lower interest rate were successful,
withdrawals could force some indi- amount you owe, how much you’re according to a 2023 LendingTree
viduals to take taxable withdrawals paying in interest and your minimum survey. The average reduction was
during their highest earning years. monthly payment amount. Then con- about six percentage points.
Adult children and other non- sider transferring your outstanding
spouse heirs who inherit a Roth IRA balance to a less costly account. Manage student loans. Federal edu-
will also be required to deplete the Several card issuers are offering 0% cation loans have fixed rates, so
account in 10 years, but with a criti- interest rates on balance transfers changes in short-term interest rates
cal difference: They won’t have to for anywhere from 12 to 21 months. won’t affect current payments. But
GETTY IMAGES

pay taxes on the money, and they There may be a transfer fee—typically you can make moves to keep your
won’t be required to take minimum 3% to 5% of the transfer amount—but loan payments manageable. If you
distributions, either. Instead, they’ll during the 0% period, your balance haven’t already, consider setting up

44 Kiplinger Personal Finance

 Money

Paying all of your bills on time is .annualcreditreport.com, you can

request free copies of your reports

the most impactful move you can weekly from each of the major
credit-reporting companies (Equi-
make to boost your credit score. fax, Experian and TransUnion).
Check your credit reports for er-
rors and signs of fraud, such as unfa-
automatic payments from your bank compare payment-plan options, go to miliar accounts that were opened in
account to the loan servicer. This https://studentaid.gov/manage-loans/ your name. If you find any problems,
helps to ensure that your payments repayment/plans. EMMA PATCH you can file a dispute with each com-
arrive on time, which contributes pany that is reporting the erroneous
to a positive credit history and de- BUILD A HEALTHY information by visiting their websites:
flects late fees. It can also earn you CREDIT HISTORY www.experian.com/disputes/main
some relief on interest. “Most lend- A strong credit profile is an impor- .html for Experian, www.transunion
ers will offer you a quarter percent— tant tool as you build wealth. A high .com/credit-disputes for TransUnion
or in some cases a half percent—in- credit score can help you nab a lower and www.equifax.com/personal/credit-
terest rate reduction as an incentive interest rate on a mortgage and other report-services/credit-dispute for
to pay automatically,” says Mark loans, and it can even affect your Equifax. You should also notify the
Kantrowitz, author of How to Appeal auto-insurance premium. company that provided the informa-
for More College Financial Aid. Paying all of your bills on time is tion in question, such as a credit card
Meanwhile, federal student loan the most impactful move you can issuer that is reporting an account
borrowers should take note that now make to boost your credit score. To you never opened.
that the federal student loan payment ensure that payments arrive by the After you file a dispute, the credit-
pause has ended, and interest is ac- date they’re due, you can set up auto- reporting company may contact the
cruing on loans again, you can claim matic transfers from your bank ac- business that reported the incorrect
the student loan interest deduction count. If you already have overdue information. If the business agrees
on your federal tax return. Depend- bills, pay them off as soon as possible. it reported inaccurate information,
ing on how much interest you pay, Another key credit-score compo- it must notify the credit-reporting
that deduction could save you a few nent is your credit-utilization ratio— companies so they can fix your
hundred dollars or more in federal the percentage of available credit that credit history.
income taxes, Kantrowitz says. you use on your credit cards. Keeping
Borrowers saddled with student the ratio below 30% can help increase Consider a credit freeze. A credit
debt can also reduce their monthly your credit score. And avoid applying freeze blocks lenders from reviewing
loan payment by switching to an ex- for multiple credit cards at once. your credit file in response to an
tended or income-driven repayment Every application results in a hard application for new credit, thwarting
plan. These plans base your monthly inquiry into your credit history, and attempts by criminals to open loans
payment on income and family size. multiple inquiries that appear on or credit cards in your name. To
But with some plans, you may ulti- your credit report in a short time can place a freeze, you can create an on-
mately pay more in interest over the negatively affect your score. Note line account with each of the major
life of the loan because the repay- that when you shop for the best rate credit-reporting companies. Go to
ment period will be longer. However, on an auto loan or mortgage, credit- www.transunion.com/credit-freeze for
with the new income-driven plan, scoring company FICO counts the TransUnion, www.experian.com/
SAVE (Saving on a Valuable Educa- multiple inquiries that may result freeze/center.html for Experian and
tion), the balance doesn’t grow from within a 45-day period as a single www.equifax.com/personal/credit-
accrued interest as long as you make inquiry, minimizing the impact on report-services/credit-freeze for Equi-
your payment in full each month. your credit score. fax. You can lift the freeze as needed—
If the payment is not enough to say, when a potential lender, landlord
cover the monthly interest on the Review your credit report for fraud or employer wants to perform a credit
loan, the government covers the rest and errors. Incorrect or fraudulent check. ELLA VINCENT
of the interest that month. You can information that appears on your
learn more about the SAVE repay- credit report could damage your BUY A HOME (OR NOT)
ment plan at https://studentaid.gov/ credit score, so you should review Homeownership has long been a
announcements-events/save-plan. To your reports regularly. At www pillar of building wealth, particularly

May 2024 45
Money

in recent years. Property apprecia- rising interest rates will never cause are paying an interest rate of 7.32%
tion over the past decade has pro- your payments to go up (and pay- on their mortgage, but Anders is
vided most homeowners with more ments could go down if you’re able hoping to refinance to a 15-year
than $100,000 in equity, according to refinance at a lower rate). And mortgage when rates come down.
to a 2023 analysis by the National historically, home prices have risen “It’s a massive investment, but we
Association of Realtors. The largest in value, says David Haas, a certified want to be here in 20 years, and I
wealth gains occurred in high-cost financial planner in Franklin Lakes, think the value of this home will be
metropolitan areas, the NAR said. N.J. “Homes are expensive, but it well worth what we’re putting into
In the San Jose metro area, for ex- would take a pretty deep recession it now,” she says.
ample, low-income earners accu- to decrease prices in any significant That said, it’s usually a bad idea to
mulated nearly $630,000 in equity way,” he says. buy a home if you think you’ll need
over the past 10 years, while middle- Home buyers also benefit from to relocate in a couple of years, be-
income earners gained $643,000. the ability to buy a six-figure (or cause you’re unlikely to recoup the
But those homeowners benefited seven-figure) asset with a 20% down up-front costs. And if you live in a
from historically low mortgage rates payment, or as little as 3.5% if you high-cost area, homeownership, no
and a sharp rise in home values. qualify for a down payment assis- matter how appealing, may be out
Today, rising mortgage rates and a tance program. “It’s the use of lever- of reach. Although the outlook for
low supply of available homes have age in homeownership that makes it home buyers seems to be improving
made owning a home out of reach so effective as a wealth-building tool in 2024 (see “Where the Housing
for many potential home buyers for individuals,” says Ralph Bender, Market is Headed,” April), many
and raised questions about whether a CFP in Temecula, Calif. “When homeowners are unwilling to sell
homeownership is still a reliable coupled with the benefits of living because they don’t want to give up
way to build wealth. quarters, it’s hard to beat.” locked-in mortgage rates of as low
Many financial planners say a Jennifer Anders, 35, of St. Augus- as 3%. That has reduced the supply
home is still a good investment, tine, says she and her boyfriend lived of available homes and driven up
offering advantages other assets on a 35-foot sailboat for nearly four competition—and prices—for those
lack. Making a monthly mortgage years so they could save up to buy a that are on the market.
payment is a form of enforced saving, home. Rocket Mortgage preapproved If you’re a renter, you can still
while providing you and your family them for a mortgage and helped build wealth by funneling money
with a place to live. A fixed-rate them find a real estate agent, and you would have spent on a down
mortgage is a hedge against inflation they purchased a 1,500-square-foot, payment and other home-related
because an economic environment of two-story home in September. They costs into retirement accounts and

46 Kiplinger Personal Finance

 Money

other savings vehicles. “I’ve never You may be able to take steps that A peril that many homeowners
been a fan of touting homeowner- increase your ability to get insurance overlook is flooding, which is not
ship as the primary way for a family and lower your costs. Florida, for covered by standard homeowners
or an individual to build wealth,” example, has a state program that insurance, Friedlander notes. While
says Michael Hausknost, a CFP in offers homeowners up to $10,000 90% of natural disasters involve
Long Beach, Calif. “The best way to to help defray the costs of certain floods, just 4% of homeowners have
build wealth is still through saving, improvements to fortify their homes flood policies. If your home isn’t in
especially when you can do so in a against storm damage. an area designated as a flood zone,
tax-deferred vehicle.” S.B.

CHECK YOUR INSURANCE

COVERAGE
Ensuring that you have adequate
The Benefits of an HSA
insurance coverage is a key part of As the cost of health care con- $8,050 for self-only coverage,
protecting the wealth you’ve worked tinues to escalate, it’s critical or $16,100 for family coverage.
to create. Use these general guide- to protect your wealth from un- Many people use funds from
lines to check whether your cover- expected—as well as ongoing— HSAs to pay current out-of-
age is on track; if you want more help medical expenses. That is partic- pocket medical and dental costs,
determining your specific needs, en- ularly important during retirement but if you can afford to cover
list a financial adviser or insurance because medical costs tend to these expenses from other
broker to run a review with you. rise as we age. Fidelity Invest- sources, leaving the money
ments estimates that a 65-year- in your HSA is an ideal way to
Insuring your home. For many old couple will spend an average save for medical expenses in
people, their home is their most of $315,000 in out-of-pocket retirement, says Ralph Bender,
valuable asset, so homeowners in- medical expenses during retire- a certified financial planner in
surance is critical. Insurance agents ment—and that doesn’t include Temecula, Calif. “The longer you
and carriers have tools to help you the cost of long-term care. can let it grow, the better off it’s
determine what your policy’s cover- One of the most effective—and going to be,” he says. You can
age limits should be, factoring in often underused—tools to man- use HSA funds to pay for medical
the replacement value of your age these expenses is a health costs that Medicare doesn’t
home and inflation, says Mark savings account. Contributions cover, as well as monthly premi-
Friedlander, corporate communi- to an HSA are pretax (or tax- ums for Medicare Part B and
cations director for the Insurance deductible, if your HSA is not Part D and Medicare Advantage
Information Institute. provided through your employer), plans. You can also use distribu-
As many homeowners—especially funds grow tax-free, and with- tions to pay a portion of long-
those in California and Florida—are drawals are tax-free as long as term-care insurance premiums;
finding out, securing property insur- the money is used for eligible the amount you can withdraw
ance at a reasonable price is becom- health care expenses. If you have tax-free depends on your age.
ing more of a challenge. Given the an individual health insurance Bender also encourages
growing risks from the effects of cli- plan, you’ll be allowed to con- clients to invest their HSA funds
mate change, including more-intense tribute up to $4,150 in 2024. in the stock market, providing
storms and wildfires, insurers are be- For family coverage, you can an even greater opportunity
coming increasingly selective about contribute up to $8,300, and if to benefit from the triple tax
who they’ll cover. Some are using you’ll be 55 or older at the end of advantage the accounts provide.
sophisticated tools to gauge risk—by the year, you can put in an extra While many of the largest HSAs
reviewing satellite images to check $1,000 in catch-up contributions. offer an investment option, re-
where trees stand on your property To qualify for an HSA, your search by the Employee Benefit
and whether you have a trampoline, health plan must have a deduct- Research Institute found that
for example. “Insurers are taking a ible of at least $1,600, or $3,200 only 12% of account holders in-
finer-tooth comb to their risk port- for a family plan. The plan must vest in assets other than cash.
folios and making a lot of nips and limit out-of-pocket expenses to SANDRA BLOCK
tucks,” says Amy Bach, executive
director of United Policyholders.

May 2024 47
Money

the cost of flood coverage “is very sold in increments of $1 million, up clients who have less than $1 million
reasonable,” Friedlander says. to $5 million. Generally, the yearly in assets). In that case, a planner who
If you rent your home, renters in- premium ranges from $200 to more charges by the hour or on a subscrip-
surance to cover your belongings is than $1,000 for a high limit, with an tion basis is probably a better choice.
well worth the price—typically about average of about $380 per year for Firms in the Garrett Planning Net-
$15 to $20 a month, says Michael $1 million to $2 million of protection. work (www.garrettplanningnetwork
DeLong, insurance research and Finally, financial planner Kara .com) provide this type of service.
advocacy associate with the Con- Sherman says not to overlook pro- You can expect to pay between $200
sumer Federation of America. tecting intangible assets, such as and $400 an hour, and some plan-
your income. Failing to ensure that ners require a minimum number of
Auto insurance. For vehicle liability you have enough disability and life hours. You can also use the Financial
insurance, Friedlander recommends insurance could imperil the liveli- Planning Association’s tool at www
drivers have $100,000 in liability cov- hood of you or your family if you .plannersearch.org to find planners
erage per person injured in an acci- pass away or become incapacitated. who charge by the hour.
dent you cause, $300,000 in total lia- “Most people don’t look to get cover- Look for an adviser who is a fidu-
bility coverage per accident for bodily age beyond what they might have ciary, which means the individual
injuries, and $100,000 per accident available through their group cover- must look out for your best interests
in liability coverage for damage you age at work,” says Sherman. You can above his or her own. All certified
cause to other vehicles and property. get preliminary quotes from multi- financial planners are required to
Additionally, collision and compre- ple insurers using websites such as adhere to fiduciary standards, so
hensive coverage insures your vehicle AccuQuote.com, LifeQuotes.com and limiting your search to CFPs is a
against damage from a collision with Policygenius.com. ELAINE SILVESTRINI good place to start.
another object or from other causes, You should also understand how
such as storms or flooding. If your HIRE AN ADVISER your planner will be paid. A fee-only
vehicle is worth less than $5,000, As you accumulate wealth, you’ll planner’s compensation comes solely
consider dropping collision and com- probably have a lot of questions: from the fees charged for advice. A
prehensive coverage to reduce your Traditional IRA or a Roth? What’s fee-based planner will charge you for
premium; the amount you’d be com- the best portfolio allocation for my advice but may also earn commis-
pensated for in a claim may be too age and risk tolerance? Can I afford sions for selling you specific products,
small to make coverage worthwhile. to retire early? such as long-term-care insurance.
Auto insurance premiums have A financial planner can help you If you have an account at a finan-
been climbing, up by 20.6% in Janu- answer these questions and prevent cial services firm, you may have
ary 2024 from a year earlier, accord- you from making decisions you may access to financial planning advice,
ing to the U.S. Bureau of Labor later regret. But good advice doesn’t depending on the amount you have
Statistics. One way to reduce costs come cheap. Many planners use invested. T. Rowe Price, for example,
is to allow your insurer to track your a model known as assets under man- provides clients who have at least
driving habits via a mobile app or de- agement, which bases fees on a $250,000 in their portfolios access to
vice that plugs into your car’s diag- percentage of the value of your port- a certified financial planner for a fee
nostic port. If you demonstrate good folio. For example, if your portfolio of 0.5% of assets. If you’re primarily
driving habits, such as obeying traf- is valued at $1 million and the plan- interested in guidance on how to
fic laws and braking safely, you may ner charges a 1% AUM fee, you’ll invest your portfolio, you can get
get a reduction in your premium. pay $10,000 a year for the advice. In low-cost advice from a robo adviser.
exchange, the planner will manage Robos use sophisticated computer
Other coverage. You might want an your investments and provide other programs to assemble and manage a
umbrella policy, especially if you have services, such as tax planning. Typi- portfolio, based on your age and risk
significant assets or are vulnerable cally, the AUM percentage charged tolerance. Management fees range
to exhausting your standard policies declines as your portfolio grows. from 0% to 0.85% of assets. For ex-
(say, because you have a swimming This model may work well for in- ample, Vanguard’s basic robo service
pool or a teenage driver). Umbrella dividuals who have a large portfolio, charges 0.15% of assets, with a mini-
insurance provides coverage if your but it’s probably not realistic for mum investment of $3,000. S.B.
homeowners or auto insurance those who are just starting out (and
claims exceed the liability limits of some planners who use the AUM For questions or comments, e-mail
your existing policies, and it’s usually model won’t provide services for feedback@kiplinger.com.

48 Kiplinger Personal Finance

Elevate Your Finance Career
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Money

HOW COUPLES CAN TALK ABOUT MONEY

KIPLINGER ADVISOR COLLECTIVE

ONEY can stand your individual money story just keep saving for 30 years” goal.
be a conten- and allow time for self-reflection. If Seeing our progress was really moti-
tious topic, you and your partner or spouse don’t vating and helped align our spending
especially agree, approach the conversation habits with the more immediate
for romantic with curiosity. MARGUERITA CHENG, goal. NICK LOPER, FOUNDER OF SIDE
partners CEO OF BLUE OCEAN GLOBAL WEALTH HUSTLE NATION
who have different spending and
saving habits, economic back- Share your past and present ex- Avoid divisive terms. Drop the
grounds, or values and beliefs. So it’s periences. Don’t start with the “spender” and “saver” labels. Every-
vital that couples talk about money numbers. Instead, begin by sharing body spends money—just at different
early in their relationships, helping your experiences with money and times. Spenders spend money now,
them to set a strong foundation for how those experiences influence and savers spend money later. You
their financial future together. you today. Then review your current can think of spending as a choice,
Ensuring that you have these financial situation together, going and you can think of saving as a
conversations the right way—so that over your income, expenses, debts strategy. Swap your paradigm from
they don’t devolve into arguments— and assets. Finally, venture into the “good or bad” to “now or later” to
is key to your success. Below, five more complex conversations around find creative ways to accomplish
financial experts from the Kiplinger understanding your priorities and your goals. KIERSTEN SAUNDERS, CO-
Advisor Collective each share one preferences so you can turn them FOUNDER OF RICH & REGULAR
piece of advice for couples on how into a joint plan. ADAM KOL, CEO OF
to approach money conversations. THE COUPLES FINANCIAL COACH Work to understand each other’s
viewpoints. Share your money sto-
Discuss what money means to both Set a near-term goal to achieve ries. Everyone has a unique history
of you. We all have money scripts together. You’re in a team sport, but and relationship with money that
based on our values and experiences. the team can’t win if the goal isn’t affects how they make decisions
Money means different things to clear or if both partners aren’t on the now. As partners, you need to under-
different people. For some, money same page. My wife and I benefited stand each other’s relationship with
may mean security or peace of mind. from having a near-term “financial money so that together, you can
For others, money may mean power independence” goal to shoot for, make decisions that accommodate
or control. It is important to under- rather than a more nebulous “we’ll both of your needs. When you dis-
agree with a decision, don’t argue
your side; instead, find out how your
partner landed there. DANA MIRANDA,
CREATOR OF HEALTHY RICH

The Kiplinger Advisor Collective is

a professional organization for per-
sonal finance advisers, managers
and executives.

ʾ
For more
information on
the Kiplinger
GETTY IMAGES

Advisor
Collective, scan
the QR code.

50 Kiplinger Personal Finance

 Commentary Money

A Financial Checklist for Widows

MONEY SMART WOMEN BY JANET BODNAR

am at the point in my life Widows need to know how much

when more of my friends income they can count on. Where
and family members are should they start? The funeral home
becoming widowed. At a typically notifies Social Security,
time when they are faced and you should follow up to see what
with a traumatic personal benefits you are entitled to. For in-
loss, they also have to deal with the stance, if you are age 67 or older, you
finances and other tasks of daily can get up to 100% of your spouse’s
living, a combination that can be benefit amount. But note that if you
overwhelming. have been receiving a 50% spousal
Stacy Francis is CEO of Francis Fi- benefit, that will stop. You can collect
nancial, in New York City, and author a smaller benefit as early as age 60,
of Financial Help for Widows: A Com- and you may also qualify for benefits
plete Resource Guide (www.francis if you’re caring for minor children.
financial.com/financial-help-for-
widows). I spoke with Francis about What other sources of income can
the steps widows need to take right you tap? If your spouse was receiving
away and those that can be delayed. a pension, you need to know if you are Don’t close joint accounts for at least
entitled to survivor benefits, and if six months in case any checks or
What would be your top piece of so, how much. If he was still working, payments come into the account for
advice to women in this situation? contact his employer to see if he was the deceased spouse.
Ask for help. When my father passed owed back pay or deferred compensa-
away recently, we set up a checklist tion, or if he had a life insurance pol- Once you have a handle on your
of all the things that needed to be icy. If you have a private policy, con- immediate finances, what’s next?
done in the first two months and tact the insurer right away. Policies Start to get a fuller picture of all your
divided them among my stepmother, typically pay out within a week, and assets and liabilities—everything
my brother and myself. For example, for a widow that can be a lifesaver. from bank, brokerage and retirement
I notified the Veterans Administra- accounts to real estate and outstand-
tion because my father had received What about your expenses? Pay ing loans. If you don’t have all of this
a VA disability benefit, which typi- immediate bills for such things as information, an estate lawyer, finan-
cally can continue to the surviving the mortgage, utilities and property cial adviser or accountant can help
spouse. taxes. Highlight subscriptions, mem- do the heavy lifting.
berships and other items that can
How can you make your job easier? be reduced or canceled. Change the Are there certain traps to avoid?
Do one thing at a time. Map out your name on things like utility bills to Don’t include personal information
tasks on paper, which is much less just yours. In more-complicated in the obituary. Keep your spending
intimidating than keeping them in cases, such as joint accounts with relatively conservative in the first
your head. Each day, tackle a certain financial institutions, you’ll need few months, and don’t make any big
number of items, and parcel out death certificates, so get at least 15 financial decisions or follow gut reac-
what you can. of them from the funeral home. tions like moving hundreds of miles
to be closer to your daughter. Wait till
a year or two down the line.
To avoid being overwhelmed, tackle
PHOTO BY NOAH WILLMAN

one thing at a time and ask for help. Janet Bodnar is editor at large
of Kiplinger Personal Finance.
Contact her at Janet.Bodnar@
futurenet.com.

May 2024 51
 TOP-YIELDING SAVINGS
30-day
Taxable Money Market yield as of Minimum
Mutual Funds Feb. 27 investment Website
Gabelli U.S. Treasury MMF
5.42% $10,000 gabelli.com
(GABXX)

Lock In High DWS Govt & Agency MF (DTGXX)*

Columbia Govt MMF (IDSXX)*
5.39
5.27
1,000
2,000
fundsus.dws.com
columbiathreadneedleus.com
T. Rowe Price Cash Res (TSCXX)* 5.25 2,500 troweprice.com

Yields on CDs Tax-Free Money Market

Mutual Funds
30-day Tax eq. yield
yield as of 24%/35%
Feb. 26 bracket
Minimum
investment Website

BY ELLA VINCENT Fidelity Municipal MMF (FTEXX) 3.30% 4.34%/5.39% $1 fidelity.com

Amer Cent T-F MMF( BNTXX) 3.27 4.30/5.34 2,500 americancentury
.com
Fidelity Tax-Exempt MMF
3.24 4.26/5.29 1 fidelity.com
(FMOXX)*
INCE March 2022, the Federal Re-
BNY Mellon Ntl Muni (MOMXX) 3.20 4.21/5.23 10,000 bnymellon.com
serve has raised short-term interest Annual
rates 11 times, and yields on certifi- Savings and Money Market yield as of Minimum
Deposit Accounts March 1 amount Website
cates of deposit have followed the
Milli Bank (Neb.)§ 5.50% $0 milli.bank
upward trajectory. According to
First Internet Bank (Ind.)† 5.36 1,000 firstib.com
Bankrate, yields on one-year CDs
ended 2023 an average 0.7 percentage point higher My Banking Direct (N.Y.)† 5.35 500 mybankingdirect.com

than they were at the beginning of the year, and Brilliant Bank (Kan.)†# 5.35 1,000 brilliant.bank
Annual
five-year CDs finished the year 0.3 percentage point # ´  $  yield as of Minimum
higher than at the start. In early March 2024, 1-Year March 1 amount Website

one-year CDs were yielding as much as 5.4%, ConnectOne Bank (N.J.)^ 5.40% $500 connectonebank.com

and yields on five-year CDs were as high as 4.6%. Alliant Credit Union (Ill.)†& 5.40 1,000 alliantcreditunion.org

But the party won’t last forever. The Fed will Bask Bank (Texas)† 5.40 1,000 baskbank.com

likely lower rates this year, possibly announcing First Flight FCU (N.C.)& 5.38 10,000 efirstflight.com
Annual
cuts this summer. And some banks, anticipating # ´  $  yield as of Minimum
rate reductions, are already starting to trim CD 5-Year March 1 amount Website

yields. So especially for longer-term savings that First Internet Bank (Ind.)† 4.61% $1,000 firstib.com

you won’t need to access in an emergency, “now is BMO Alto (Ill.)† 4.60 0 alto.bmo.com
First Nat. Bank of America (Mich.) 4.55 1,000 fnba.com
the time to lock in
Pima CU (Ariz.)&
RATE UPDATES rates,” says Greg 4.53 250 pimafederal.org

For the latest savings McBride, chief *Fund is waiving all or a portion of its expenses. §Bank operates primarily through
a mobile app. †Internet only. #Money market deposit account. ^CD term is 11
yields and loan rates, visit financial analyst months. &Must be a member; to become a member, see website or call.
kiplinger.com/links/rates. at Bankrate. SOURCES: Bankrate, DepositAccounts, Money Fund Report (iMoneyNet).

For top rewards cards, go “They’re not get-

to kiplinger.com/kpf/ ting any higher.” TOP-YIELDING CHECKING
Must meet activity requirements* Annual
rewardscards. If you won’t yield as of Balance
need the money Account Issuer March 1 range^ Website
Pelican State CU (La.)& 6.05% $0–20,000 pelicanstatecu.com
for several years, investing in a five-year CD rather
Andrews FCU (Md.)& 6.00 0–25,000 andrewsfcu.org
than a shorter-term CD is probably the best choice,
oklahomacentral
says McBride. You’ll be able to hold on to a decent Oklahoma Central CU (Okla.)& 6.00 0–10,000
.creditunion
yield for a longer period. Alternatively, you can Orion FCU (Tenn.)& 6.00 0–10,000 orionfcu.com
create a CD ladder, spreading your savings across *To earn the maximum rate, you must meet requirements such as using your debit
CDs with terms of one, two, three, four and five card several times monthly and receiving electronic statements. ^Portion of the
balance higher than the listed range earns a lower rate or no interest. &Must be a
years. When a CD comes to maturity each year, member; to become a member, see website. SOURCE: DepositAccounts.
you can cash it out if you need to use the money
elsewhere or reinvest the funds in a five-year CD, YIELD BENCHMARKS Yield Month ago Year ago
continuing the ladder. U.S. Series EE savings bonds 2.70% 2.70% 2.10%
The table at right lists top-yielding CDs that are U.S. Series I savings bonds 5.27 5.27 6.89
available nationwide. You can also check websites Six-month Treasury bills 5.27 5.15 5.20
such as www.bankrate.com, www.cdvalet.com and Five-year Treasury notes 4.17 3.80 4.27
www.depositaccounts.com, all of which allow you Ten-year Treasury notes 4.19 3.87 4.01
to enter your state or zip code to find the highest
As of March 1, 2024. EE savings bonds purchased after May 1, 2005, have a fixed
rates available at local institutions. rate of interest. Bonds purchased before May 1, 1995, earn a minimum of 4% or a
market-based rate from date of purchase. Bonds bought between May 1, 1995, and
May 1, 2005, earn a market-based rate from date of purchase. Source for
Reach the author at Ella.Vincent@futurenet.com. Treasuries: U.S. Treasury

52 Kiplinger Personal Finance

 RETIREMENT

54 Kiplinger Personal Finance

 EASE ON
OU may
have spent
decades
saving for

DOWN THE
retirement, waiting
for the day when
you could step back

ROAD TO
from long hours at
work and do what you
want with your time.
But stopping work entirely can be

RETIREMENT
difficult, especially if you love cer-
tain aspects of your job. Phasing into
retirement—continuing to work part-
time, even for just a fraction of your
original salary—can provide the per-
fect balance and make a big differ-
ence in your retirement security.
The option is increasingly popular:
A 2023 survey by Principal Financial
found that more than half of workers
want to gradually reduce their hours
before they eventually stop working.
Flexible retirement can look very
different from person to person, de-
pending on the semi-retiree’s prefer-
ences and career type. Some people
retire from their full-time job and
do consulting work in a related field
or contract work for their former
employer. Others switch to another

Want to keep working, type of work—taking a part-time

job with a nonprofit or a business
they’ve always been interested in,
just not as hard? for example, or exploring flexible
gig work.
A phased retirement may Some others continue to work
part-time for their longtime em-
just be the answer. ployer, and they may even get health
insurance, participate in the 401(k)
BY KIMBERLY LANKFORD plan and receive other benefits if
they work a certain number of hours
each week. “A lot of companies are
moving in that direction because
there’s a benefit to keeping the in-
stitutional knowledge that long-
tenured, loyal employees have,” says
Judith Ward, a certified financial

May 2024 55
Retirement

planner and thought leadership di-

rector for T. Rowe Price.
Ward knows about phased retire-
ment from experience. After decades
of helping clients prepare to retire,
she wasn’t sure what she wanted to
do next as she was approaching age
60 herself. “I was agonizing about
not knowing what I would do in
retirement, even though I knew
I wanted to move in that direction,”
she says. “I wanted to go part-time
and have time to figure it out.”
Ward asked her employer about
her options. She discovered that
she could still qualify for employee
health insurance if she worked at
least 20 hours per week and that
she could continue saving in the
company’s 401(k), too. Last October,
she cut back to working 2½ days
each week, and she couldn’t be
happier. “It’s more comfortable to
work longer in this way than with
the grind of full-time work,” says
Ward, now 61. “It is a nice balance UǸΐЃʾι̿ΐƲʔ̒ɶʾЃƲ̿ΐƔʾƲͣʠ̺ΔΐʾǺƲ̿ΐȉƲЁɇŕɶƲΐ̿ƲΔɇ̿ƲʔƲʠΔΐ
of work and exploring what happens
when I stop work altogether. I can ʾ̒ΔɇʾʠͣƍΐЃʾιΐŰʾιɶƔΐΔ̿ЃΐǸ̿ƲƲɶüʠŰƲΐŰʾʠͣιɶΔɇʠȓǢ
play pickleball on Fridays because
I’m not working.”
ͣƲΔΔɇʠȓΐΔȴƲΐȓ̿ʾιʠƔϴʾ̿ɯΐΔʾΐŕιɇɶƔΐЃʾι̿ΐŕιͣɇʠƲͣͣΐ
Flexible retirement has taken a ŕƲǸʾ̿ƲΐЃʾιΐɶƲüϰƲΐЃʾι̿ΐǸιɶɶɄΔɇʔƲΐɪʾŕ̛
different form for some of her col-
leagues. Some work five mornings about a year before you’re planning half-time, she gets half her previous
a week and take the afternoons off, to make the change. salary and must contribute more
while another colleague alternated Have a plan in mind before you toward her premium for the health
months. “He would do project work, discuss a potential transition so that insurance plan. But health coverage
and then he’d be off for a month or you’re ready to explain how you can is a valuable benefit until she quali-
two,” says Ward. “But when he was do your job part-time and continue fies for Medicare at 65. Each em-
back, he would generally work five to add value to the company. If your ployer’s requirements are different,
days a week in the office.” employer isn’t thrilled with the idea, so it’s important to nail down the
Nearly two-thirds of large em- you’ll have plenty of time to decide details of any coverage that may be
ployers have helped their workers whether to continue working full- available.
come up with a plan for phased time or to think of another way to
retirement, according to Principal cut back, whether through consult- LOOKING BEYOND YOUR
GETTY IMAGES (INCLUDING PREVIOUS SPREAD)

Financial, but smaller companies ing, freelance assignments or a part- EMPLOYER

are less likely to allow the arrange- time job with a different company. If your employer doesn’t offer flex-
ment. If you work for a company “Over the course of the year, you can ible retirement options, you could
that is willing to consider it, you try to network or have something use your skills to do freelance
may have a better shot at getting lined up,” she says. consulting—setting the groundwork
the terms you want if you approach Ward also recommends talking to build your business before you
your manager well before you’re with the human resources depart- leave your full-time job—or take a
ready to scale back. Ward recom- ment to learn more about the impact part-time job in another field entirely.
mends talking to your manager on your benefits. Since she’s working “I think that the changing nature of

56 Kiplinger Personal Finance

 Retirement

work has really helped retirees or “The arrangement has been ter- JUMPING BACK IN
those transitioning to retirement,” rific,” Ed says. “It has given us time AFTER A BREAK
says Ward. “It has made that transi- to set up our new home near Char- If you fully retire but later come back
tion easier because remote and gig lotte, do some traveling, spend time to the workforce, you’re part of an-
work are available. It adds to that with our grandson, play more golf other trend: unretirement. That’s
idea of flexibility.” and become involved in our active- what Donna Skeels Cygan wound up
To remain competitive, work on adult community.” doing. Skeels Cygan, a CFP in Albu-
staying healthy and keep your job After one year of phased retire- querque, sold her financial planning
skills up to date, says Catherine ment, Wendy decided to fully retire at firm in 2007 with a two-year non-
Collinson, president and CEO of the the end of January. Her health insur- compete clause in the contract. She
Transamerica Center for Retirement ance benefits ended, so Ed signed up worked for the company that bought
Studies. “These factors can enhance for Medicare, and Wendy will con- her firm for one year, and after that
one’s negotiating power to work and tinue her former employer’s health she planned to retire and work on
someday retire on their own terms.” insurance through COBRA until she writing her book, The Joy of Finan-
If you already have your own busi- is 65 and eligible for Medicare, too. cial Security. She didn’t think she
ness, you can still find a way to cut (COBRA is a federal law that lets you would meet with clients anymore.
back. Ed Emerman, 67, ran a small keep your employer’s health insur- But her former clients kept asking
public relations agency in Princeton, ance for up to 18 months after you her whether she’d work with them
N.J., for 30 years and had worked in leave your job, but your premiums again. “I missed my clients so much
corporate PR roles for 10 years be- usually jump because your employer that I went back with a business
fore that. His wife, Wendy, 64, had no longer helps pay the cost.) “It gives model that was very small,” she says.
a long career as a technical writer. us peace of mind,” Ed says. Instead of taking on as many clients
After their grandson was born two Ed still works two days a week for as she had in the past, she focused on
years ago, the Emermans started his PR firm. But, he says, “if I find a few—not necessarily the wealthiest,
thinking about retirement. “About a myself wanting more free time, I will but those she enjoyed working with
year ago, Wendy and I both decided gladly take down the shingle and look the most. “I really worked hard
it was time to either fully retire or back at my career in public relations on soul-searching about whether I
reduce the number of hours we work with fond memories and no regrets.” wanted to come back and how I could
each week,” Ed says. “We opted to
try and phase into retirement, given
that we both enjoy the work we do KIPTIP
BEWARE: YOUR EARNINGS COULD
and weren’t sure we were ready to
retire cold turkey.”
They approached Wendy’s em- REDUCE SOCIAL SECURITY PAYMENTS
ployer and Ed’s clients to see whether
If you’re thinking about supple- Once that happens, you can earn
they would be amenable to a reduced
menting your income from a as much as you want without
work week. “As it turned out, her em-
job with Social Security benefits, worrying about the earnings test.
ployer and my clients were both very
your benefits could be tempo- If you end up being subject to
willing to accommodate our requests.
rarily reduced. The earnings the earnings test—because you
They valued our services and wanted
test affects individuals who started claiming benefits at 62
to keep us around, even at a reduced
claim benefits before they reach while retired and then went back
level.” Wendy’s employer let her stay
full retirement age and continue work, for example—the forfeited
on the company health insurance
to work. benefits aren’t lost forever. In-
policy and continue contributing
In 2024, Social Security will stead, your monthly benefit
to her 401(k) even though she was
withhold $1 of your benefits for amount will be adjusted upward
working just two days a week.
every $2 you earn over $22,320. in the month you reach full retire-
The couple moved to Charlotte,
If you reach full retirement age ment age to account for the bene-
N.C., to be closer to their daughter and
this year, Social Security will with- fits that were temporarily taken
son-in-law and enjoy the lower cost of
hold $1 for every $3 you earn over away. For more information, see
living and warmer climate. They have
$59,520, but only up to the month www.ssa.gov/benefits/retirement/
more time to travel to Arlington, Va.,
you reach full retirement age. planner/whileworking.html.
to visit their other daughter, son-in-
law and grandson, too.

May 2024 57
Retirement

come back without getting sucked savings for a few years, leaving money without triggering the earn-
into working 24/7 again,” she says. more money to grow in your tax- ings test, which temporarily reduces
She started her new company in advantaged accounts. benefits for those who have earnings
2010, sold it at the end of 2019 and Continuing to contribute to your above a specific threshold (for more
worked with the new owner for two retirement savings can give you a leg on the earnings test, see page 57).
years to help with the transition. She up, too. You may still qualify to con- If you wait past your full retirement
retired in November 2021, when she tribute to your employer’s 401(k) and age to claim benefits, your payouts
was a few weeks shy of 64. Now she’s receive an employer match. And you get a boost. For each year you delay
working on a second book—about can contribute to a Roth IRA as long between full retirement age and age
personal finance for women older as you have earned income from a job. 70, your annual benefits will increase
than 50—and she writes a financial In 2024, people 50 and older can con- by 8%. “Not only is there a lot more
column for the Albuquerque Journal. tribute up to $8,000 (or the amount of a benefit, but the annual cost-of-
She may eventually expand her writ- you earned from working, if less). living adjustment is based on a higher
ing career. You can contribute to a Roth IRA for base amount of benefit, so the growth
“None of this is concrete,” she 2024 only if your modified adjusted of future benefits has a compound-
says. “You need to stay flexible and gross income is below $161,000 if ing effect,” says Mitchell Freedman,
look for opportunities that will keep single or $240,000 if married filing a CPA and personal financial spe-
you happy.” jointly. If you earned too much to cialist in Westlake Village, Calif.
contribute to a Roth in the past, you “Being able to delay Social Secu-
REAPING THE may qualify after you partially retire. rity really is a big deal,” says Ward.
FINANCIAL BENEFITS
A phased retirement (or unretire-
ment) can make a significant differ-
UǸΐЃʾι̿ΐƲʔ̒ɶʾЃƲ̿ΐʾǺƲ̿ͣΐȴƲüɶΔȴΐɇʠͣι̿üʠŰƲΐ
ence in your financial readiness for Δʾΐ̒ü̿ΔɄΔɇʔƲΐϴʾ̿ɯƲ̿ͣƍΐΔȴüΔΐŰʾϰƲ̿üȓƲΐŰʾιɶƔΐ
full retirement. According to surveys
from the Transamerica Center for
ʔüɯƲΐüΐŕɇȓΐƔɇǺƲ̿ƲʠŰƲΐɇʠΐЃʾι̿ΐǾʠüʠŰƲͣΐɇǸΐ
Retirement Studies, most people cite Ѓʾι̺̿ƲΐʠʾΔΐЃƲΔΐƲɶɇȓɇŕɶƲΐǸʾ̿ΐsƲƔɇŰü̿Ʋ̛
financial reasons for working past
traditional retirement age, such You won’t get a current tax break “It’s an inflation-adjusted source of
as a need for additional income, or for Roth contributions, but the money income that you’re going to have for
concerns about Social Security or grows tax-free, and you won’t have the rest of your life.” (For more on
inadequate savings, Collinson says. to take required minimum distribu- deciding the age at which to claim
Those who want to continue work- tions from the account. benefits, see “When Should You File
ing in retirement also cite health and for Social Security?” April.)
aging-related reasons, such as staying Increase lifetime income by delay-
active, keeping their brain alert and ing Social Security. The extra in- Qualify for larger Social Security
having a sense of purpose, she says. come you earn from working part- benefits. The Social Security formula
You can reap extra financial bene- time can help you afford to postpone looks at average monthly earnings,
fits if you know a few key strategies. claiming Social Security benefits, adjusted for inflation, for the 35 years
“Not having to tap into your retire- which could boost your monthly that your earnings were highest.
ment assets for just a few more years, payout when you finally sign up. Working a few extra years, even part-
coupled with being able to delay Full retirement age is 66 for people time, could replace years in the for-
Social Security, can be significant,” born from 1943 to 1954 and gradually mula that you had little or no earnings.
says Ward. increases, by two months for each That’s especially helpful for women
Consider the following benefits to birth year, until it reaches age 67 for who took some time off in the middle
make the most of a phased retirement: people born in 1960 and later. Claim- of their careers to raise their children,
ing benefits at age 62 rather than your says Skeels Cygan. “When you look at
Preserve your retirement savings— full retirement age can reduce your my top 35 years, I have at least six
and sock away even more. Even if annual benefits by as much as 30%, years with $0 earnings when I was
you earn much less than you earned depending on the year you were born. having our kids and decided to take
from full-time work, the extra money Another good reason to wait until at some time off, and two years when
can help minimize the amount you least full retirement age to apply for I was studying to become a CFP,”
withdraw from your retirement benefits: You can earn any amount of she says. “Even if you’re working

58 Kiplinger Personal Finance

 Retirement

part-time, you can replace those

zeroes, and that can be significant.”
You can check your Social Secu-
rity earnings record by logging in
to your my Social Security account
online (www.ssa.gov/myaccount).
You should also check your earnings
record for errors that could lower
the amount of your benefits. “It
doesn’t happen often, but we’ve
seen enough cases of an incorrect
earnings history to recommend
everyone check their records,” says
Tim Steffen, director of advanced
planning for Robert W. Baird & Co.

Get health insurance before age 65—

at a reasonable price. If your em-
ployer lets part-time workers con-
tinue to receive health insurance
benefits, taking advantage of that can B and Part D if your modified ad- The money you convert from a
make a big difference in your finances justed gross income exceeds specific traditional IRA or 401(k) to a Roth
if you stop full-time work before thresholds—more than $103,000 if grows tax-free and isn’t subject to
you’re eligible for Medicare. You may single or $206,000 if married filing required minimum distributions.
have to pay a higher premium than jointly on your most recent income You can withdraw money from the
you did when working full-time, but tax return on file (which was gener- Roth without it increasing your
it’s often a better deal than getting ally your 2022 return when 2024 modified adjusted gross income—
your own coverage in your sixties. premiums were set). Most people and possibly incurring a Medicare
If your employer doesn’t offer will pay $174.70 per month for Medi- high-income surcharge or raising
health insurance, you can get a pol- care Part B in 2024, but high earners your tax bracket in the future.
icy on the Affordable Care Act mar- can pay from $244.60 to $594.00, “I recommend that they do it over
ketplace at HealthCare.gov or your depending on their income. several years,” says Skeels Cygan.
state exchange (type your zip code However, if your income has Because taxable conversions could
at www.healthcare.gov to find your dropped since you filed your return make you subject to the Medicare
exchange). Because your income is because of certain life-changing high-income surcharge, the best
likely lower than it was when you events, including retirement from time to do them is before the sur-
were working full-time, you may your full-time job, you can ask the charge becomes a concern. And
qualify for a significant subsidy Social Security Administration to since the high-income surcharge is
to help with premiums. Estimate use your more recent income when generally based on a two-year look-
your costs and how much of a pre- calculating your Medicare premi- back, you may want to avoid or limit
mium reduction you may get using ums. For details, see www.ssa.gov/ conversions once you reach age 63.
the calculator at www.kff.org/ medicare/lower-irmaa. You can also use the extra money
interactive/subsidy-calculator. from a phased retirement to pay
If you’re self-employed and have Do a Roth conversion. Skeels Cygan down debt and build your emergency
to buy your own health insurance, recommends that people in a phased fund, which becomes even more im-
your premiums may be tax-deduct- retirement convert some money from portant after you stop working. And
ible; see www.irs.gov/forms-pubs/ a traditional IRA or 401(k) to a Roth you can pad your travel fund—using
about-form-7206. IRA and use earnings from work to the extra money to visit grandkids or
You can enroll in Medicare when pay the taxes on the conversion. A go on a big trip, for example—without
you turn 65. But if you’re still work- Roth conversion can make sense depleting your retirement savings.
GETTY IMAGES

ing, even part-time, be aware of the when you scale back at work because
high-income surcharge. You may lowering your income may reduce For questions or comments, e-mail
have to pay more for Medicare Part the amount of tax you pay. feedback@kiplinger.com.

May 2024 59
 Fundamentals
SPOTTING GREAT DIVIDEND STOCKS
They’ve lagged lately but are due for a comeback. Here’s what to look for.
PRACTICAL PORTFOLIO BY KIM CLARK

IVIDEND inves-
tors tend to be
patient, but lately
their patience
has been tested.
Dividend stocks
have badly lagged the rest of the
market recently. The S&P Dividend
Aristocrats—a list companies in the
S&P 500 index that have raised their
dividends for at least 25 years in a
row—have returned less than 10%
over the 12 months that ended Feb-

GETTY IMAGES
ruary 29. The S&P 500 gained more
than 30% over the same period.
A major reason for the recent
underperformance is the surge in
interest rates that began in 2022.
When rates on Treasury securities
and cash accounts were stuck below
1%, dividend stocks’ yields were at-
tractive by comparison. But with
short-term Treasury securities and cording to S&P Dow Jones ʹ economic growth expected
cash accounts paying more than 4%, Indices. Visa yields less to moderate in 2024, and
compared with the S&P 500’s cur- than 1% but has the potential for recession
rent yield of 1.5%, dividend stocks The way back. As overall a big cash lingering, dividends may
have been a tougher sell. That could stock valuations approach buffer and good take a more prominent role
change with expected rate cuts from historically high levels, prospects for in driving total returns
the Fed later this year. some analysts say that stock earnings and for investors,” says Diana
And dividends are far from dead. price gains can’t help but cash-flow growth. Wagner, a portfolio man-
Meta Platforms, the owner of Face- slow, making dividends a ager at Capital Group.
book, one of the “Magnificent Seven” more significant portion of future Dividend stocks are not all alike,
technology-oriented stocks that have stock returns. And don’t overlook and interested investors should first
driven most of the stock market gains the defensive quality of dividends. figure out what kind of dividend
of the past year, paid its first regular Thanks to their regular cash pay- payer fits their needs. Retirees look-
dividend in early 2024. That means ments, dividend stocks tend to be ing for immediate income often focus
the majority of the Magnificent Seven less volatile and serve as buffers on companies paying comparatively
stocks now pay dividends. And more during recessions and bear markets. generous dividends, for example.
GETTY IMAGES

than two-thirds of S&P 500 compa- For example, the S&P 500 lost more Those who have a longer time to in-
nies have raised or started paying than 18% in 2022, but the Dividend vest might look for companies with
dividends since January 2023, ac- Aristocrats lost only about 6%. “With lower current yields but a higher

60 Kiplinger Personal Finance

 Fundamentals

probability of raising their payouts pay out, on average, only about 21% sometimes, ill-advised investments).
and at a faster rate. Whatever kind of their profits, retaining the rest “Stock buybacks are like dating,” he
of dividend you’re looking for—high for internal investments, such as says, because companies can stop
yield, high growth or the holy grail research. Energy companies have them at any time without conse-
of both—professional dividend inves- recently been paying about 50% of quence. “Dividends are like mar-
tors say to consider three factors. their profits to investors. Just as riage” because companies that cut
with dividend yields, a high number them are typically punished harshly
Dividend yield. Yields vary by sector is a warning sign, Horan says. But by investors. Meta’s decision to start
and industry. Real estate, energy and it’s important to look at this measure paying a dividend is “a good start,”
utilities companies generally pay at over time, because some companies says Barclay. But he will wait at least
least 3%. Some niches in declining in- can have a high ratio during one a year to see whether the company
dustries, such as tobacco companies, bad year but then recover. Consis- follows up with a commitment to
pay out high dividends because they tently paying out more than about regular dividend increases. In the
no longer invest much in growth and 75% leaves little buffer for potential meantime, he’s bullish on Microsoft
focus on generating cash for share- trouble, Horan says. (MSFT, $413), which is the second-
holders. Technology and communi- Dividend investors should also biggest holding of Columbia Divi-
cations firms, as well as companies pay close attention to a company’s dend Income. Microsoft’s yield
that provide nonessential consumer free cash flow (the cash left over is just 0.7%, but it has raised its
goods or services, have low average after expenditures to operate, main- dividend every year for the past 18
yields—currently less than 1%, ac-

Dividend stocks are not all alike, and interested

cording to S&P Dow Jones Indices.
Just try not to be dazzled by the

investors should first figure out what kind

highest yields. Generally speaking,
a super-high yield, or a sudden jump,

of dividend payer fits their needs.

can signal a troubled company whose
stock price is sinking, or it may simply
indicate an unsustainably high pay-
out. Michael Tang, a portfolio man- tain and expand the business) be- years—proving that paying a divi-
ager for the Hamlin High Dividend cause that’s where dividends come dend doesn’t have to hamper invest-
Equity fund, is careful about reach- from. Mike Barclay, senior portfolio ment or growth.
ing too far for yield. For example, manager of the Columbia Dividend An easy way to invest in a diversi-
although some real estate invest- Income Fund, says a big cash buffer fied basket of dividend payers is
ment trusts currently yield more is what attracted him to payment with a well-run dividend-oriented
than 9%, Tang’s only REIT is Lamar company Visa (V, $283), which he fund. You might consider T. Rowe
Advertising (symbol LAMR, $111), recently added to the fund’s hold- Price Dividend Growth (PRDGX) or
which yields 4.7%. With a focus on ings. Its dividend is low; Visa yields Vanguard Equity Income (VEIPX),
billboards, Lamar has avoided prob- less than 1%. But Barclay expects both members of the Kiplinger 25, the
lematic commercial real estate and earnings and cash flow to continue list of our favorite actively managed
retail properties, Tang says. to grow. “What you want is a strat- funds. (For more on the Kip 25, see
egy that’s going to allow you to con- “A Solid Year for the Kiplinger 25,”
Payout ratio. One way to tell whether sistently compound returns and on page 18.) Schwab U.S. Dividend
a company can afford to keep paying— have the dividend grow in a healthy Equity (SCHD) is a member of the
and potentially raise—its dividend is fashion,” he says. Kiplinger ETF 20, the list of our
to look at the percentage of earnings favorite exchange-traded funds. The
it pays out as dividends, known as History. A commitment to a steadily Schwab fund tracks the Dow Jones
the payout ratio, says Stephen Horan, rising dividend is a sign of capital U.S. Dividend 100 index, a list of
an associate professor of finance at discipline, says Barclay. Fledgling companies that have paid dividends
the University of North Carolina companies husband their cash to for at least 10 consecutive years and
Wilmington. Although the average invest in expanding their business. have strong balance sheets.
payout ratio for the S&P 500 was Less-mature companies with a
recently about 36%, this, too, varies surplus of cash tend to spend it You can contact the author at
by industry. Technology companies on buying back company stock (or, Kim.Clark@futurenet.com.

May 2024 61
Fundamentals

Navigating a Gray Divorce

Divvying up assets accumulated over many years of marriage can be complicated.
FAMILY FINANCES BY ELLA VINCENT

“
T
ILL death do us part” where you live, Vasileff says. If are equitable distribution states,
no longer applies to you’re in one of the nine commu- divorcing couples have the op-
a growing number of nity property states—Arizona, tion of filing a community prop-
older couples. A Bowling Green California, Idaho, Louisiana, Ne- erty agreement to divide assets
State University study found that vada, New Mexico, Texas, Wash- 50-50 through a community-
between 1990 and 2021, the di- ington and Wisconsin—assets property trust. However, they
vorce rate more than doubled for acquired during your marriage must create the trust before
those ages 55 to 64, and the rate will be divided equally. divorce proceedings begin.
tripled for those 65 and older. All the other states are equita-
“People are living longer, they ble distribution, or “kitchen sink,” Retirement accounts. The rules
are healthier, and divorce doesn’t states in which assets acquired for splitting assets in retirement
have the stigma it used to have,” during your marriage are split accounts depend on the type of
says Lili Vasileff, a certified finan- based on the spouses’ individual accounts you own. Plans covered
cial planner and an expert on the incomes, Vasileff says. In that by the Employee Retirement
financial aspects of divorce. But case, the lower-earning spouse Income Security Act (ERISA),
a late-in-life divorce can come may be entitled to a larger share which include 401(k) plans
with plenty of challenges. of assets than the higher-earning and pensions, must be divided
spouse so that the lower earner through a qualified domestic re-
Equal versus equitable split of can maintain his or her standard lations order. A QDRO is issued
assets. How your assets will be of living after the divorce. by a court or state agency and
divided in a divorce depends on Although Alaska and Florida recognizes a divorcing spouse’s
right to receive all or a portion
of the account owner’s defined-
contribution plan or pension.
There are two ways to divide
plan assets using a QDRO. In
a separate-interest QDRO, the
spouse who is the nonparticipant
in the retirement plan can collect
benefits even if the owner of the
plan hasn’t retired, Vasileff says.
In a shared-interest QDRO, the
nonparticipant—known as the al-
ternate payee—is awarded a share
of the ex-spouse’s benefits after
he or she retires. Under a shared-
interest approach, for example,
your ex-spouse would be required
to wait until you retire to receive
payments from your pension.
Once both parties agree to the
terms, the account owner gives
GETTY IMAGES

the document to the plan admin-

istrator, and the QDRO must
be certified by the court. A few

62 Kiplinger Personal Finance

 Fundamentals

months may pass before the order Andy Heller, 61, a real estate to understand the amount you’ll
is implemented. Vasileff recom- investor and author of Take receive in Social Security benefits.
mends contacting the administra- the High Road: Divorce with That’s particularly important
tor of your pension or retirement Compassion for Yourself and if you were the lower-earning
plan and your divorce attorney Your Family, divorced in 2014 spouse, because there’s a good
for additional guidance on how after eight years of marriage. chance you’ll be able to receive
to divide your 401(k) funds or After Heller’s divorce, he benefits based on your ex’s earn-
pension with your ex-spouse. started paying about $7,000 a ings history.
A QDRO isn’t required to divide month in alimony and $5,000 You (or your ex, if you were
IRAs that you accumulated during a month in child support for the higher earner) are eligible
for up to 50% of your ex-spouse’s
Divorce Rates Tick Up for Older Americans benefit, although the amount
will be reduced if you file before
Although divorce rates among younger Americans have dropped over the you reach full retirement age
past three decades, those 45 and older are divorcing at higher rates. The (66 if you were born from 1943
60
figures below reflect the number of people divorcing per 1,000. to 1954, gradually increasing to
67 for those born in 1960 or later).
47.2 To qualify, you must be 62 or
older and currently unmarried,
40 and your marriage to your ex
33.3 must have lasted at least 10 years.

22.6
19.0 19.7 19.4
20 18.1
15.8
13.2 13.1
10.6

5.1 5.5
1.8
0
TOTAL 15-24 25-34 35-44 45-54 55-64 65+

1990 your marriage, but you will need his children, Lily, 18, and Jacob, In addition, if your ex qualifies
2021 a divorce decree. If you agree to 16. But because Heller is an for benefits but has yet to apply,
transfer funds from your IRA to entrepreneur, he negotiated an you can still start collecting So-
SOURCE:
Bowling Green
your ex-spouse’s account (or vice agreement with his ex-wife that cial Security based on the ex’s
State University versa), Vasileff recommends using reflects fluctuations in his income. record, though you must have
a trustee-to-trustee transfer. That “If my business is suffering like been divorced for at least two
way, you’ll avoid incurring early- it did during the Great Recession years. Claiming benefits on your
withdrawal penalties and income [in 2007–09], I have the right to ex-spouse’s record has no effect
taxes on the withdrawals. ask that her alimony be reduced.” on his or her benefits or the ben-
Once you’ve finalized your Heller’s financial responsibili- efits of your ex’s new spouse.
divorce, make sure to remove ties for his children won’t stop “If your ex-husband or ex-wife
your ex-spouse as a beneficiary when they reach 18 because gets 50% of your Social Security,
for your retirement, bank and he plans to help pay for their you’ll still get 100% of your bene-
brokerage accounts, along with college tuition. Vasileff recom- fits,” Vasileff says.
your insurance policies. mends including details on how For more information about
to divide the cost of tuition and your eligibility to claim your for-
Alimony and child support. other college expenses in your mer spouse’s benefits, contact
Even older couples may still need divorce agreement. your local Social Security office
to negotiate alimony and child or visit www.ssa.gov.
support—and those obligations Social Security. When calculat-
don’t necessarily end when the ing how divorce will affect your You can contact the author at
children are no longer minors. retirement income, you’ll need Ella.Vincent@futurenet.com.

May 2024 63
Fundamentals

SUPERCHARGE COLLEGE SAVINGS WITH A 529 PLAN

The sooner you start, the more money you’ll have for your child’s education.
BASICS BY EMMA PATCH

Y
EAR after year, the break, but you should also pay proaches. The age-based alloca-
cost of higher education attention to fees and investment tion typically offers a range of
continues to climb, and options when choosing a plan. investment strategies, from low
many parents face the troubling Compare state plans at www risk to aggressive.
prospect that expenses could in- .savingforcollege.com.
crease significantly more by the To get the most benefit from Using your 529 funds. If you
time their kids get to college. In- tax-free growth, you should start withdraw money from a 529 plan
vesting in a 529 college-savings investing in a plan as soon as pos- for nonqualified purposes, you’ll
plan offers tax and financial aid sible. If you make a monthly con- pay federal income taxes and
benefits, and it gives your savings tribution of $200 for 18 years, for a 10% penalty on the earnings.
the opportunity to grow in the example, with an average gain However, if it turns out your
stock market. of 7% a year, you’ll have about child doesn’t need all of the
A 529 plan is a state-spon- $84,000 when the child is ready money—because he or she de-
sored college education savings to enroll in college. You can cides not to attend college, for
account. Withdrawals are tax- crunch the numbers yourself example—you can transfer the
free as long as the money is with the calculator at www. plan to another relative or name
used for qualified educational bankrate.com/banking/savings/ yourself as the beneficiary if
expenses, which include tuition simple-savings-calculator. you’re interested in pursuing a
and fees, books, supplies, and When you invest the funds in college degree.
room and board. In addition, your 529, you’ll generally have a You may also be able to roll
two-thirds of states offer an choice between a dynamic plan To get the unused 529 funds into the bene-
income tax break for contribu- or a static plan. A static 529 plan most benefit ficiary’s Roth IRA. To qualify
tions to the state’s 529 plan. invests all of your contributions from tax-free for a rollover, the 529 must have
Another benefit is that 529s are in index funds or a similar port- growth, you been open for 15 years or more,
treated favorably for purposes of folio, while a dynamic portfolio— should start and the amount you can roll over
financial aid. When a prospective also known as an age-based investing in a each year is limited to the stan-
student applies to college, assets plan—adjusts the asset alloca- plan as soon dard IRA maximum contribu-
that the student owns are usually tion each year, becoming pro- as possible. tion ($7,000 in 2024 for those
weighed more heavily than the gressively more conservative younger than 50). There’s also
parent’s assets when determin- as the first year of college ap- a lifetime cap for Roth IRA roll-
ing eligibility for financial aid. overs of $35,000 per beneficiary.
However, if the prospective stu- In addition, the amount you roll
dent is a 529 beneficiary or is the over must have been in the ac-
owner of a 529 account, assets in count for at least five years, says
the plan are treated as a parent Mary Morris, CEO of Virginia529.
asset, which helps to maximize There are also restrictions on the
aid, says Mark Kantrowitz, timing of withdrawals. “So even
author of How to Appeal for if you’ve had the account for 15
More College Financial Aid. years, you can’t dump a bunch of
Generally, you can invest in money in and the next week or
any state’s 529 plan regardless of the next month move it into a
where you live, although a hand- Roth,” she says.
GETTY IMAGES

ful of states limit their plans to

residents. Investing in your own You can contact the author at
state’s plan may provide a tax Emma.Patch@futurenet.com.

64 Kiplinger Personal Finance

Join the fight to end cancer.
Donate Real Estate.

We accept land, residential, and commercial real estate.

Do you have land or property you no longer want or need?

Donating it to Stand Up To Cancer (SU2C) is a meaningful way to give to our cause – and
could result in tax benefits for you. Your property donation can help us generate awareness,
educate the public on cancer prevention, and help more people diagnosed with cancer
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when you donate instead of sell.

To learn more, visit:

standuptocancer.org/giveproperty | 844-277-HOME (4663)
Stand Up To Cancer is a 501(c)(3) charitable organization.
 REWARDS

FIND THE

In the wake of the ENUS

created by

pandemic, cruises Michelin-

star-earning

are more popular

chefs. Enter-
tainment

than ever—and the

that rivals Broadway shows. “Virtual
balconies” that give those in win-

choices are plentiful.

dowless rooms real-time views of
the ocean outside the ship on floor-
to-ceiling multimedia screens.
BY LAURA PETRECCA With their massive size, myriad on-
board experiences and technical ad-

66 Kiplinger Personal Finance

vances, modern cruise options make who want to squeeze in some work With more than 300 oceangoing
the Love Boat look like a dinghy. or stay connected with others at ships operating worldwide—including
“The cruise of today is much dif- home, once-spotty cruise internet the introduction of 12 new ones this
ferent than the cruise of five, 10 or access is now much more reliable. year—there’s a mainstream cruise
30 years ago,” says Colleen McDan- “If you ask any cruise line execu- experience for just about everyone’s
iel, editor-in-chief of Cruise Critic, a tive, they’ll tell you they don’t com- interests and budget. Whether you’re
website that provides cruise reviews pete against other cruise lines,” says a cruise connoisseur or a first-timer,
and information. McDaniel, who was recently on a here’s how to plan the perfect voyage.
Depending on the cruise, travelers ship with seven pools and more than
can enjoy onboard amenities such as three-dozen dining, bar and night- ENVISION YOUR IDEAL
an art gallery, ice skating rink, rock life offerings. “They compete against EXPEDITION
climbing wall, skydiving simulator land options, and they’re keeping “It’s important to consider what
and even a planetarium. For those themselves very competitive.” you’re looking for in a vacation,”

May 2024 67
Rewards

says Laura Poe, a travel adviser and viding singles-specific activities lowing cruise line and ship-specific
founder of the travel-planning firm and eliminating the extra fee for hashtags, such as #CarnivalCruise
Curated by Laura Poe. “Are you more not sharing a room. And if a vacation and #IconOfTheSeas, on social media.
destination-focused or more ship- with your extended family is more
focused? Are there specific experi- your style, you can find a good fit, PARTNER WITH A
ences that are most meaningful to too, as many cruise lines are also TRAVEL ADVISER
you? Who will you be traveling with? offering activities for different ages, Planning a cruise can be compli-
Are there any physical limitations or interests and mobility levels. cated. You’ll face a wide range of
other preferences for your party?” “There is a cruise for everyone, decisions, including cabin location,
If off-boat excursions are your pri- and getting on the right cruise line is food options, internet package type,
ority, consider where you’d like to key to having a positive experience,” and which activities and excursions
go. Do you want to explore medieval says Chris Caulfield, travel adviser to prioritize. On top of that, you’ll
cities or observe wildlife in its natu- and owner of a CruiseOne travel- need to get a grasp of added costs,
ral habitat? Popular destinations for agency franchise. such as port fees and gratuities, and
2024 include the Caribbean as well Trip-comparison sites, Facebook understand cancellation policies.
as Alaska, Iceland, Antarctica and groups and discussion forums such This is where an experienced
the Galápagos Islands. as those on Cruise Critic can help travel adviser comes in. An adviser
If you plan to spend most of your you find cruises that fit your desires, can guide you throughout your en-
time on the ship, are you more in- budget and ideal travel schedule. tire journey, from picking a cruise
terested in sunbathing by a pool or Read comments and ask questions to finding a cabin away from noisy
participating in activities such as to get a feel for what to expect. Fellow areas to avoiding surprise charges
cooking classes and line dancing? cruisers are often more than happy on your final bill.
These considerations can help you to share their experiences and give Their services usually come at no
select the best cruise line and itinerary. you their take on different cruise additional cost because cruise lines
For instance, smaller ships often have lines. Katherine McLain Pursley, who typically pay commissions to these
access to more off-the-beaten-path has gone on more than 25 cruises advisers, says Cruise Critic’s McDan-
ports, while larger ones usually offer with her husband, Joe, uses YouTube iel. In addition, they can often pro-
many onboard options for entertain- for research. “There are endless vid- vide discounts and perks that you
ment and other activities, Poe says. eos of every cruise ship taken by en- wouldn’t find on your own, says
GETTTY IMAGES

If your idea of a dream vacation is thusiastic passengers,” she says. Trapper Martin, travel adviser with
going it alone, you’re in luck, as more You can also get a real-time feel the firm Dream Vacations Trapper
cruises are offering solo cabins, pro- for what’s happening onboard by fol- Martin, Shane Smartt & Associates.

68 Kiplinger Personal Finance

 Rewards

To find an adviser, visit the Cruise UNDERSTAND YOUR penchant for piña coladas. However,
Lines International Association’s EXPECTED COSTS some packages can set you back
website at https://cruising.org/en/ From internet and port fees to ex- more than $100 per day, and typi-
find-a-travel-agent or the American cursion expenses and automatically cally you must opt in for the entire
Society of Travel Advisors’ website added gratuities, most cruises are length of the trip. Unless you’re
at https://my.asta.org/connect-with- jam-packed with expenses beyond planning on enjoying alcoholic
a-travel-advisor. Many cruise lines your basic fare. drinks all day long, you might be bet-
also provide online directories of To avoid a post-trip financial head- ter off buying your coconut concoc-
advisers. ache, take time to review your ex- tions individually. In addition, some
pected costs before embarking. Factor cruises exclude certain drinks from
BOOK (AND ARRIVE) EARLY in the total expense of the trip, which their packages, so it’s important to
Once you’ve decided on a cruise, don’t could include airfare or hotel stays be- understand the fine print of a drinks
hold off on booking in hopes that fore and after your cruise, expenses package or any others that might
prices will drop. Demand for cruises related to your time on the ship, and seem right for you.
is strong, as those forced ashore dur- costs such as travel insurance or ar-
ing the pandemic are eager to ex- ranging a pet-sitting service for any OPTIMIZE YOUR
plore the world. Ocean cruising is furry companions left at home. ONBOARD EXPERIENCE
one of fastest-growing areas of tour- You’ll have to reassess and priori- A little planning can bring huge
ism, according to the Cruise Lines tize if your budget doesn’t meet your returns. An important initial step:
International Association. anticipated expenses. If you’re a Check out the deck plan on your
“Start early to maximize your foodie, you might want to splurge cruise line’s website or app. Find out
savings and access the best cabin on specialty dining rather than spa where your cabin is in relation to ele-
category and location selections,” treatments. Or you may be okay vators, activities and restaurants, says
says Poe. “Although many consum- with a smaller, less-expensive cabin McDaniel. You can discover activities
ers believe there may be last minute to free up funds for excursions. and amenities you didn’t realize were
cruise deals to be had, planning and In some cases, signing up for on the ship, such as a tucked-away
booking well in advance of a desired drinks, spa service, specialty dining hot tub or mini golf course.
sail date is really how travelers can and other packages can help reduce YouTube is also helpful here, says
save the most money.” In fact, cruise your costs. But it’s crucial to do the veteran cruiser McLain Pursley.
fares typically increase closer to the math. For instance, the drinks pack- “Look for videos in which the film-
sail date, she says. age might work for you if you have a maker points out the little nooks and
Although you could find last-
minute deals in years past, “they are
far rarer than they used to be,” says
McDaniel. One potential way to
find a discount is to check in with a
cruise line just after final payment is
due, which is about 90 days out.
There could be cancellations from
people who decided to opt out, which
may result in discounts as cruise
lines seek to fill available cabins,
McDaniel says. “But we are not
seeing that as much as we used to.”
Plan to get to your departure port
a minimum of one day ahead, says
travel adviser Martin. This way
you’ll build in some wiggle room
if your flight is delayed or canceled
or if you miss a connection. And if
you’re crossing time zones, arriving
early will give you time to shake off
your jet lag.

May 2024 69
Rewards

crannies on the ship,” she says, not- and ask whether room upgrades are notes, so you may not get a fully
ing that you can gain insights such available. There may be inventory authentic experience.
as the times the ice cream station is due to people missing their flights While planning your cruise, check
least busy and which theater seats or canceling at the last minute for out tips from online forums and so-
could provide you with the experi- other reasons. If a better room is cial media groups on how to get the
ence you want. available, you could get it at a most out of shoreline visits. Travel
Travel advisers can also offer cheaper rate than its initial price. advisers can also guide you on ev-
guidance and help you understand However, don’t bank on this strat- erything from security and local
which activities, meals and enter- egy to get into a room class you customs to finding hidden gems
tainment to book in advance. And strongly prefer, as there’s no guaran- and handling currency differences.
they can point out discounts you tee the ship will have openings. “If In addition to doing the ship ex-
might reap by signing up early. there is a category you really want cursions, you can explore on foot
“Many cruise lines offer savings to sail in, I would suggest booking or sign up for independent tours
if you pre-book things like a shore it rather than hoping it might be that could allow you to tour with
excursion, a spa treatment or dining available as an upgrade,” Rosa says. a smaller group. Rosa says some
independent providers offer less-
expensive, more-personalized expe-
ditions and give you the same guar-
antees as cruise ship excursions.
If you’re in a new time zone,
understand the difference between
ship time and the time in the area
you’re visiting. Ship time is set and
followed by your cruise ship and
may differ from the local time zone
in your ports. It’s critical to be
aboard by the ship time’s deadline,
or you could be left on the pier as
your cruise glides away. Always
have the ship’s contact information
with you so you can get in touch
if something goes awry while you’re
ashore.
Finally, if you’re thinking about
experience,” says McDaniel. In addi- MAKE THE MOST OF YOUR your next cruising adventure while
tion, you can typically find discounts TIME AT PORT STOPS you’re still at sea, you can get a head
at the spa on port days because busi- Think through what you want to get start by booking that future cruise
ness is light as many passengers out of shoreline visits before you head while still onboard. Many cruise
explore on land, she says. to those areas. For instance, booking lines offer onboard-only specials on
For popular ship activities, make excursions through your cruise line future excursions.
reservations if they’re offered, as it’s offers convenience and typically the “The perfect time to take advan-
increasingly rare that you can just guarantee that you’ll make it back tage of discounts and special incen-
walk up and participate, McDaniel to the ship before it departs. tives on your next cruise is while
adds. (You can typically do this At the same time, if you go this you’re still enjoying your current
through the cruise line’s app.) route, you could end up on a big cruise,” says McLain Pursley, who
Sign up as early in your journey motor coach filled with your fellow has capitalized on that opportunity
as possible for activities that could cruise mates, which may or may not multiple times to save money on the
be shut down due to windy weather be your preferred style of exploring, Disney cruises she has taken with
or rough seas. says Rosa. her husband.
Jen Rosa, a franchise owner and If staying close to the ship and
GETTY IMAGES

travel adviser with Cruise Planners, roaming the port area is more your For questions or comments about
tells her clients to go to guest ser- speed, keep in mind that these areas this article, e-mail feedback@
vices as soon as they get on the ship are often designed for tourists, Rosa kiplinger.com.

70 Kiplinger Personal Finance

 Rewards

Great Values in Electric Bikes

At less than $1,500, these e-bikes provide much of what higher-end models offer.
BY DAN CAVALLARI AND MIKE PROSPERO

A
N electric bi- ʼ (the component that connects the
cycle can be Ride1Up handlebars to the bike frame), allow-
Turris
a great way to ing riders to move the handlebars to
get around, offering suit their reach. Plus, you can choose
motorized assistance a step-through design—in other
when you want a break words, there’s no top tube stretching
from pedaling. But horizontally across the frame, allow-
buying one can put a ing you to get on and off the bike
significant dent in your without lifting your leg high. That’s
wallet, with some mod- a plus for shorter riders or those who
els priced at a few thou- have limited mobility. If you prefer
sand dollars or more. BEST FOR HILLS to keep the top tube, you can choose
For the budget-conscious, the Ride1Up Turris a step-over design instead.
experts at product-review website Price: $1,295
Tom’s Guide (www.tomsguide.com) Estimated range: 25 to 45 miles BEST FOR ANTITHEFT OPTIONS
tested several e-bikes with prices of Maximum assisted speed: 28 mph Wing Freedom 2
less than $1,500. These four options Weight: 55 pounds Price: $999 for a model that has a
are among those that rose to the top. battery with a 35-mile range; $1,199
Ride1Up’s Turris will surprise you with a 45-mile range; $1,349 with a
BEST FOR CITY COMMUTERS the second you start pedaling. A 60-mile range
Ride1Up Roadster V2 powerful, 750-watt motor kicks in Estimated range: 35 to 60 miles,
Price: $1,095 almost immediately, with far more depending on the battery selected
Estimated range: 20 to 30 miles punch than you might expect from Maximum assisted speed: 20 mph
Maximum assisted speed: 24 mph a bike at this price. The Turris also Weight: 39 pounds
Weight: 33 pounds provides a comfortable ride, with a
super-soft seat and wide tires that Because electric bikes are often
The Ride1Up Roadster V2 looks like make this e-bike versatile for various more valuable than standard bicy-
a regular, non-motorized commuter road surfaces, too. cles, they’re attractive targets for
bike, but it hides inside its frame a Note that the Turris requires you thieves. You can customize the Wing
battery capable of delivering up to to attach the handlebars, front wheel Freedom 2 with a few antitheft fea-
30 miles of pedal-assisted power. and pedals and make a few adjust- tures, including an AirTag (a track-
At 33 pounds, it’s light, and it’s zippy ments to the fenders, which might ing device that sends out a Bluetooth
and fun to ride. The bike comes in require a trip to your local bike shop. signal) so that you can find the bike
two sizes, so it should accommodate if it’s ever stolen, and a built-in alarm,
riders of nearly all heights. BEST FOR ADJUSTABLE FEATURES which you can activate with a key fob.
There are some trade-offs for the Propella 9S Pro V2 Plus, the bike’s battery is removable.
affordable price. It’s a single-speed Price: $1,299 Beyond its security features, the
model, so it can be somewhat hard to Estimated range: 55 miles maximum Wing Freedom 2 is comfortable to
get going on hills, and its pedal assist Maximum assisted speed: 20 mph ride, and with a horizontal tube that
COURTESY OF RIDE1UP

lags a bit. But for daily commutes on Weight: 43.5 pounds extends past the handlebars and the
flat or rolling terrain, the Roadster seat, it has a distinctive look.
V2 proves itself as a capable and The Propella 9S Pro V2 impresses
sleek bike that’s easy to ride with or with its power, simplicity and build For questions or comments, e-mail
without the motor assist engaged. quality. It features an adjustable stem feedback@kiplinger.com.

May 2024 71
 Paying It Forward
AFFORDABLE REPAIRS FOR
How high is demand for your ser-
vices? When we opened The Lift
Garage in 2013, we got a significant

CAR OWNERS IN NEED response from the community. Word

spread very fast—there was pressing
demand for our services. And meet-
A social worker became a mechanic and opened a ing this demand remains challeng-
ing. We have a waiting period of
garage to serve her community. INTERVIEW BY EMMA PATCH three to four months for appoint-
ments. We repair about 75 to 80
from various other sources, too, cars a month, but we see about
including foundations and some 120 cars each month. We have to
corporate aid, although we do not deem some of them “DNI”—Do Not
get government grants. Invest. Handling these difficult
repair cases, where vehicles are
What experience did you have with deemed unrepairable due to safety
social justice work prior to opening concerns, presents emotional and
The Lift Garage? logistical challenges.
I had extensive ex- Especially amid ris-
perience through CATHY HEYING ing costs and limited
church ministry and availability of used
Founder of The
social work. The idea cars, we don’t have
Lift Garage
for The Lift Garage the resources to pro-
came after I encoun- MINNEAPOLIS vide customers with
tered individuals another car.
facing homelessness
and realized the pivotal role reliable Do you depend on volunteers? We
transportation played in their lives. operate with a paid, qualified staff
of auto technicians who adeptly nav-
What was it like to learn about igate the balance between business
automotive services? Transitioning efficiency and social service. Under-
into automotive services required standing the unique needs of our
What is The Lift Garage? The Lift that I obtain an auto technology clientele, such as individuals who
Garage is a nonprofit shop that pro- degree. I was 38 years old, in a class- live in their vehicles, can require a
vides affordable auto repairs for room with about 40 18-year-old delicate approach. Our technicians
low-income Minnesotans, aiming boys. Admittedly, I went in a little double as social workers in these
to enhance the safety and stability cocky. I thought, Well, I have a mas- moments. If we know that a cus-
of their vehicles. With a mission to ter’s degree. How hard can this be? tomer is living in their car and we
facilitate secure transportation and But I’m a people person, and I’m all need to keep the car overnight, we
better lives, we charge only $15 per about feelings and helping people will pay for their hotel stay and for
hour for labor, plus the cost of parts. manage their trauma—not figuring an Uber ride to the hotel.
We work with customers who have a out what the fuel pressure should
household income at or below 150% be on any given car. Learning about What do you wish more people
of the federal poverty guidelines. automotive services involves a whole understood about the work you do?
PHOTO BY AZUL PHOTOGRAPHY

different part of your brain, and I It’s challenging being both a business
How is the shop funded? Our fund- really struggled. But despite initial and a social service organization.
ing primarily comes from donations, challenges and doubts, I persisted, Balancing efficiency with compas-
with individual donors contributing graduating and embarking on this sion is a perpetual challenge as we
around 60% of the required $1.7 mil- journey to address the community’s strive to meet the profound transpor-
lion annual budget. Support comes need for affordable car repairs. tation needs of the community.

72 Kiplinger Personal Finance

 Saturday June 8
Manhatta,
28 Liberty Street,
New York City

• Grand Tasting
• Masterclasses
• Award-winning
wines

VISIT EVENTS.DECANTER.COM/NEWYORK
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