Money Magic - Laurence Kotlikoff

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• The author originally wanted to be a doctor but changed course after an unpleasant frog dissection experience in college. He became interested in economics instead.

• He was particularly drawn to public finance and studying how government policies affect personal finances at the macro and micro levels.

• The author sees pioneering economist Irving Fisher as the father of economics-based financial planning due to his work on optimal lifetime saving. However, Fisher made a huge mistake by putting all his money in stocks right before the 1929 crash.

• In the decades after Fisher, other economists like Friedman, Modigliani, Samuelson etc expanded on his lifecycle models.

• The author and other economists started comparing real world financial behavior to theoretical ideals and found most people were making big mistakes like undersaving, overborrowing, mismanaging investments etc.

• Many economists attributed this to behavioral flaws but the author disagrees. He argues personal finance is extremely complex, beyond most people’s mental capacities without clear guidance.

• Even experts struggle with quick mental calculations of optimal lifetime spending. Government rules on Social Security, taxes etc are convoluted. And the financial industry intentionally obfuscates to profit off confusion.

• The author aims to provide clear, comprehensive, economics-based guidance to help people make smart financial decisions.

• Economists have long studied personal finance, but historically their work has been academic and inaccessible to the general public.

• Recent advances in algorithms and computing power now allow economists to provide personalized financial planning advice to individuals.

• The author has spent decades developing financial planning software that uses economics to calculate optimal financial decisions.

• The key goal of economics-based financial planning is to maximize one’s lifetime living standard - the level of spending per household member that one can sustain over their lifetime.

• Most people make major financial decisions without considering their impact on long-term living standards and sustainability. As a result, they miss out on significant money, happiness, and risk mitigation.

• The book will use the author’s financial planning software to provide personalized advice across all stages of life to help readers make optimal decisions regarding education, career, lifestyle, retirement, investments, etc. to maximize lifetime living standards.

• In addition to benefiting oneself, this knowledge can be used to help family and friends make better financial decisions.

In summary, economics and computing advances now allow for personalized, optimized financial planning focused on maximizing long-term living standards, moving beyond traditional rules of thumb and generic advice.

• The author has created a “living standard machine” (personal finance software) to help people raise their standard of living in three key ways: making more money, reducing risk, and getting more happiness from spending.

• To make more money, the software shows how delaying Social Security benefits, strategically withdrawing from 401(k)s, downsizing housing, and moving to a tax-friendly state can dramatically increase retirement spending.

• To reduce risk, the software focuses on earnings risk, mortality risk, longevity risk, inflation risk, and investment risk. An example is buying an annuity to protect against the risk of a parent living longer than expected.

• To increase happiness, the software calculates the true “price” of personal lifestyle decisions like early retirement in terms of impact on sustainable standard of living. This helps people make more informed choices.

• Overall, the machine incorporates economics principles and technical knowledge to provide customized guidance on raising living standards through increased earnings, reduced risks, and smarter spending.

Here are the key points on choosing a career to maximize lifetime earnings:

• Compare potential careers thoroughly using the BLS Occupational Employment and Wage Statistics. There can be big differences in pay across careers that seem similar.

• Consider earnings growth over the course of a career, not just starting salaries. Some careers have much faster growth than others.

• Factor in the costs and years required for education and training. High-paying careers often require substantial upfront investments.

• Do the math to calculate lifetime earnings for different career paths. Small differences in annual pay can compound to hundreds of thousands of dollars over a full career.

• Be open to changing careers multiple times to find the best match. On average, people change careers 4 times between ages 18-48.

• Look beyond common careers like doctor or lawyer. Many less-known careers like orthotist/prosthetist can pay just as well or better.

• Remember that job satisfaction matters too. The highest paying career isn’t necessarily the best personal fit.

The key is thoroughly researching potential careers and doing the math on lifetime earnings to make the best choice. Be open to pivoting as you learn more about yourself and the job market.

• The BLS website provides helpful data on salaries, required education, and projected job growth for different careers like O&Ps and HAs. This data suggests O&Ps have higher salaries and faster wage growth.

• However, you need to dig deeper than BLS categories to understand day-to-day job duties. Reaching out to people in a career via networking is key.

• Consider long-term appeal and sustainability of a career. High-paying jobs often have high burnout. Also research if a career is at risk of automation, outsourcing, or offshoring.

• Factor in taxes. Higher pay bunched into fewer years means more taxes and less lifetime spending money.

• Location matters for salaries. Adjust wages for local cost of living.

• Training costs and time commitments are also important to weigh.

• There are more potential careers than BLS lists, so broad exploration is useful.

In summary, weigh salaries, job duties, career longevity, taxes, location, and training costs when choosing a career. Leverage BLS data and networking to make an informed decision.

• Jobs that involve non-repetitive tasks and human interaction, like healthcare roles, are less likely to be outsourced or automated. Consider careers in rapidly growing industries or geographic areas where new jobs are constantly emerging.

• Trade off higher initial earnings for faster earnings growth over your career. The career with slower starting pay but faster pay growth can yield far higher lifetime earnings.

• Find a career you love that others hate - you’ll get compensating differentials (extra pay) for doing unpleasant work that you actually enjoy.

• Hire yourself by starting your own business. Insider knowledge of your field and personal skills like design or interacting with clients can help you provide better services than employers. Prudence and slow growth without debt are keys to success.

Here are the key points about when to retire:

• Retiring early is generally not financially advisable, as it means giving up years or decades of potential earnings. Continuing to work longer is usually the safer financial choice.

• That said, there are situations where early retirement makes sense, such as if you’ve carefully planned for it or can no longer work due to health reasons.

• Early retirement is essentially an expensive, long vacation. Think carefully about the true costs of giving up those potential earnings vs the benefits of extra leisure time.

• Consider phased retirement or shifting to part-time work if you want more flexibility but don’t want to give up work entirely. This allows you to ease into full retirement.

• Make sure to factor in not just earnings but also benefits like healthcare when deciding on retirement timing. Losing employer health insurance can be very costly.

• Run the numbers and have a clear financial plan before choosing early retirement. Understand the tradeoffs and be confident you can afford it long-term.

• Retiring later is generally the safer financial bet. Each year of continuing to work means more earnings, higher Social Security benefits, and more retirement savings.

• Keep an open mind about retirement timing based on your health, job satisfaction, spouse’s situation, etc. Don’t retire just because it seems expected. Make an informed choice.

• The large baby boomer generation is retiring early despite having saved little for retirement. Nearly half of retired boomers have minimal savings.

• Widespread undersaving for retirement is a major problem. Half of working families today risk a drop in living standards when they retire. Working just 2 years longer could cut that risk in half.

• Retiring too early when you haven’t saved enough is problematic because people often underestimate how long they will live. More than half of 50-year-olds will live past age 82 and a quarter will make it to 90.

• Your planning horizon shouldn’t be average life expectancy but rather your maximum lifespan—the oldest you could possibly live. This may be 100 or more.

• Retiring early increases the risk of outliving your savings if you live well beyond life expectancy. To maintain living standards to age 100, you may need to save 20% or more of income.

• You can’t count on dying on time or at life expectancy. You need to financially plan to your maximum age.

Here are the key points about maximizing Social Security benefits:

• Plan for the longest possible life expectancy when deciding when to start taking benefits. Delaying benefits can substantially increase your lifetime benefits.

• Consider spousal and survivor benefits which can provide higher benefits for married couples.

• Know your full retirement age - this is when you qualify for your full benefits based on your earnings record. Delaying past this age increases your benefit amount.

• Be aware of benefits for minor children and divorced spouses. These can provide additional income.

• Understand the earnings test - how working while collecting benefits before your full retirement age can temporarily reduce benefits.

• Consider taxes on benefits - up to 85% of benefits can be taxed above certain income thresholds. Planning can help minimize taxes.

• Avoid early filing mistakes - make sure you understand your options before filing for reduced benefits at age 62.

• Maximize survivor benefits - coordinate spousal benefits to maximize survivor benefits after one spouse dies.

• Check your earnings record for accuracy - errors can reduce your benefits if not corrected.

• Make a customized claiming plan - work with an expert to analyze your full situation and optimize claiming.

• Social Security benefits are extremely important financially for most people, often being their largest asset. You need to actively manage this asset.

• There are 13 different Social Security benefits you may qualify for either now or in the future. You need to understand which ones you and your family may be eligible for.

• Social Security is a “use it or lose it” system - you need to formally apply for any benefits you want, or you won’t get them. Don’t rely on Social Security to tell you what you’re owed.

• There are strategies you can use to maximize your lifetime Social Security benefits, like delaying claiming and using spousal/divorced spousal benefits.

• Be proactive in learning about and claiming Social Security - the SSA website and staff can provide misleading or incorrect advice. You need to educate yourself.

• With the right strategies, you can turn Social Security into a “personal gold mine” and get the most out of the system. But you have to be proactive and treat it like any other financial asset.

The Social Security system is extremely complex, and the staff are underpaid, overworked, and undertrained. As a result, they often provide inaccurate or misleading information. To get the benefits you deserve, you need to educate yourself, be persistent, and not take no for an answer. Shop around between different offices and staffers. You can appeal if they deny you benefits you believe you qualify for. Avoid the Social Security Administration’s own benefit calculators, as they can significantly over- or underestimate. The best strategy is often to delay claiming benefits until age 70, as this can substantially increase lifetime benefits. But beware - the SSA may try to scam you into taking benefits earlier with a retroactive lump sum payment that results in lower benefits long-term. Overall, you need to be very proactive to get the most out of the system. The staff mean well but are not always competent.

• Waiting until age 70 to collect Social Security can increase your benefits substantially due to delayed retirement credits that increase benefits 8% per year between full retirement age and 70. This advantage remains even if benefits are cut in the future.

• Delaying Social Security can provide higher survivor benefits to a spouse or ex-spouse. The survivor benefits are based on the retirement benefit you would have received at full retirement age, not the reduced benefit if taken earlier.

• If you started benefits before age 70, you can suspend them from full retirement age up until age 70 in order to earn delayed retirement credits and increase your benefit later. However, this will also suspend spousal or child benefits.

• The Social Security earnings test reduces benefits if you earn above an exempt amount before full retirement age. However, benefits are recalculated at full retirement age to account for this reduction, so the earnings test does not truly result in a loss for most people.

• Timing Social Security is complex, with tradeoffs between individual and spousal/family benefits. But in general, delaying benefits as long as possible, up to age 70, is advised to maximize lifetime benefits.

• If eligible, you can collect spousal benefits while letting your own retirement benefit grow. For example, a 69-year-old wife with a 62-year-old husband who claims benefits early can collect half of the husband’s full benefit for a year before switching to her own larger benefit at 70.

• It can be optimal to sequence widow(er) and retirement benefits. For example, a 62-year-old widow could claim widow benefits first and switch to her own retirement benefit at 70 when it’s larger. This can result in over $500,000 more in lifetime benefits compared to claiming both at once.

• The SSA has been accused of erroneously filing people for both widow(er) and retirement benefits, costing recipients $132 million so far. Widow(er)s should verify in writing they are only filing for one benefit.

• It’s not always best to claim widow(er) benefits at full retirement age. If the deceased spouse claimed early, the widow(er) benefit may peak years before. Double check to avoid losing thousands.

• Earning more income during your career can raise your retirement benefits. Your benefits are based on your top 35 years of earnings, so working more years can replace lower earnings years. Even small increases late in your career can mean higher benefits.

• Social Security benefits are based on your primary insurance amount (PIA), which is calculated using your 35 highest years of earnings. Earnings before age 60 are indexed for wage growth, but earnings after 60 are not indexed.

• Working longer, especially past age 60, can substantially increase your PIA and lifetime benefits because your new nominal earnings are likely higher than your previous indexed earnings.

• Even working just one more year can significantly boost lifetime benefits, often providing a very high return compared to additional taxes paid.

• If you have gaps in your earnings history, working longer allows you to replace zero or low earnings years with higher earnings, raising your PIA.

• For those with pensions from non-covered employment, working longer in Social Security covered jobs can help reduce Windfall Elimination Provision penalties and allow you to collect more Social Security benefits.

• Spousal and survivor benefits are also increased if you work longer and raise your own PIA.

• The key is that additional earnings late in your career can dramatically increase your Social Security benefits beyond just the usual cost-of-living increases.

Here is a summary of the key points about tax-deferred and Roth retirement accounts:

• There are two main types of retirement accounts: tax-deferred (e.g. traditional IRAs, 401(k)s) and Roth (e.g. Roth IRAs, Roth 401(k)s).

• With tax-deferred accounts, you don’t pay taxes on contributions or earnings until you withdraw the money in retirement. This lowers your current taxable income but you pay taxes later.

• With Roth accounts, you pay taxes on contributions now but withdrawals in retirement are tax-free. This doesn’t lower current taxes but avoids taxes on earnings over time.

• You can convert traditional retirement accounts to Roth accounts by paying taxes on the amount converted, allowing you to shift some tax liability to the future.

• There are limits on annual contributions to retirement accounts set by the IRS. Contribution limits are higher for those 50 and over.

• Employer 401(k) matches provide ‘free money’ that should always be taken advantage of.

• You can move retirement assets between different account types via transfers and rollovers to optimize tax treatment.

• Properly using retirement accounts can substantially lower lifetime taxes and increase retirement resources.

Here’s a summary of the key points about employer matching contributions and contribution limits for IRAs and 401(k)s:

• 401(k) plans are a type of defined contribution (DC) plan where employers match employee contributions up to a limit. DC plans have largely replaced defined benefit (DB) plans in the private sector.

• With 401(k)s, employees can invest their contributions and employer matches into various funds and securities. The money grows tax-deferred. Withdrawals are taxed as ordinary income.

• Roth 401(k) contributions are made after-tax, so withdrawals are tax-free. Non-Roth 401(k) contributions are pre-tax, so withdrawals are taxed.

• IRAs also allow tax-deferred or Roth contributions up to annual limits. Traditional IRA contributions may be tax-deductible depending on income. Roth IRA eligibility depends on income level.

• In 2021, the contribution limit was $6,000 for IRAs ($7,000 if over 50) and $19,500 for 401(k)s ($26,000 if over 50).

• IRA deductibility and Roth IRA eligibility depend on whether you have an employer retirement plan and your income level. There are phase-outs at certain income thresholds.

• You can contribute to both IRAs and 401(k)s in the same year up to the separate limits. The income-based IRA restrictions don’t affect 401(k) eligibility.

• Annuities can provide guaranteed lifetime income from retirement accounts but have inflation risk. QLACs are a type of deferred annuity that can start payments later (up to age 85).

In summary, 401(k) and IRA contribution limits and tax treatment depend on account type, income level, and access to an employer plan. Carefully check the rules each year.

• Traditional IRAs allow you to make tax-deductible contributions, lowering your current taxable income. Withdrawals in retirement are taxed as ordinary income. Contribution limits depend on your age and whether you have a retirement plan through work.

• Roth IRAs do not offer a tax deduction for contributions, but withdrawals in retirement are tax-free. Contribution limits do not depend on having an employer retirement plan.

• Regardless of IRA type, if you or your spouse has an employer retirement plan, deductible traditional IRA contributions are limited based on your modified adjusted gross income (MAGI).

• Spousal IRAs allow a non-working spouse to contribute to their own IRA based on the working spouse’s income. Contributions are limited to the individual IRA limits.

• Employer contributions to retirement plans like 401(k)s are made pre-tax, lowering your current taxable income. Withdrawals are taxed as ordinary income.

• You can convert funds from a traditional IRA to a Roth IRA by withdrawing and paying taxes on the amount, then re-contributing to a Roth. This is called a Roth conversion.

• Roth conversions allow you to pay taxes now at a lower rate and avoid taxes on withdrawals in retirement when your rate may be higher.

• You can time tax payments by choosing between pre-tax (deductible) and after-tax (Roth) retirement contributions based on expected income and tax brackets now versus in retirement.

• Contributing to a traditional IRA or 401(k) can provide large lifetime spending gains due to tax-deferred growth and being taxed at a lower rate in retirement. For example, contributing 6% of his salary to an IRA could give a 25-year-old named Jerry an extra $39,403 in lifetime spending.

• The gains are even larger with an employer 401(k) match. With a 6% match, Jerry’s lifetime spending gain would be $150,231 - over 4 years of after-tax earnings.

• Higher-income workers like 3x Jerry have less to gain in percentage terms because their tax brackets don’t fall as much in retirement. But in absolute dollars, the gains are still significant.

• Roth accounts provide smaller gains for lower-income workers like regular Jerry, but can provide larger gains for higher-income workers like 3x Jerry who need to save more and would otherwise have more assets exposed to taxes.

• Future tax hikes reduce the appeal of traditional accounts but increase the appeal of Roths, which shelter assets from taxation.

• Properly timing Roth conversions to low-tax years can produce significant savings, but doing them in high-tax years can be costly.

• Starting tax-deferred withdrawals at the optimal age (like 62 for Jean) can also produce tax savings versus withdrawing too early or too late.

• Delay claiming Social Security benefits until age 70 to maximize the benefit amount.

• Start taking smooth withdrawals from retirement accounts like IRAs and 401(k)s at age 65. Withdraw just enough to supplement other income sources until age 70 when maximum Social Security benefits kick in.

• Consider doing Roth IRA conversions between ages 65-70 when in lower tax brackets to shelter future growth from taxes. But beware this can create cash flow issues if regular assets are low.

• Those with substantial regular assets relative to retirement accounts get the most benefit from Roth conversions since they can cover the extra taxes without disrupting spending.

• Taking retirement account withdrawals early can allow delaying Social Security claim and boost lifetime benefits significantly. The risk-adjusted return from delaying Social Security exceeds stock market returns.

• Contribute to health savings accounts (HSAs) while working to get tax-free savings for healthcare expenses in retirement. HSAs can act as supplemental retirement savings.

Here are the key points from the housing discussion:

• Being “house rich” means getting good housing value for your money, as opposed to being “house poor” and spending too much on housing.

• To calculate the true price of a home, factor in property taxes, insurance, maintenance, utilities, association fees, mortgage interest, and opportunity cost of the down payment.

• Define your ideal housing market based on amenities, commute, culture, climate, costs, and community.

• Owning often beats renting financially thanks to tax breaks, equity growth, and avoided landlord fees, but renting provides more flexibility.

• Mortgages are costly due to interest payments and lost opportunity cost of the down payment. Paying them off faster can save significantly.

• Using retirement accounts to pay off a mortgage faster can be a smart financial move overall.

• Homeownership provides tax breaks on capital gains and imputed rent not taxed.

• Cohabiting, including with parents/relatives, can reduce housing costs through shared expenses.

• Downsizing to a smaller, cheaper home is another way to increase housing affordability.

• Trapped home equity can be accessed via options like reverse mortgages, but these have high costs.

In summary, being house rich means finding the optimal housing situation that aligns with your financial resources and broader life goals. Carefully weigh the pros and cons of buying versus renting, mortgage payoff strategies, cohabitation, downsizing, and tapping home equity.

• The author was skeptical about moving from Boston to Providence due to cheaper housing, but it ended up being a great decision. Housing in Providence was a third the price per square foot of their Boston condo.

• Don’t overpay for housing - comparison shop and keep tabs on housing markets where you might want to live. With remote work, housing markets are broader than just where you work.

• Choosing a home involves weighing many factors like price, location, amenities etc. Use “compensating differentials” - how much more would you pay to have attribute X over attribute Y. This puts a value on subjective factors.

• To compare renting vs buying, think of owned home as a rental with “imputed rent” or look at renting as “buying” the right to permanently rent. Add up all costs on both sides - mortgage interest, property taxes, insurance, maintenance etc.

• They spent 25% of income on housing in Boston, now just 12.5% in Providence. Moving raised their living standard substantially by cutting housing costs.

• Mortgage payments are not inherently part of the cost of owning a home. The cost comes from the interest rate differential between the mortgage rate and the safe interest rate you could earn on investments.

• Mortgages are financial losers because their interest rates are higher than safe investment rates. They are also tax losers now that the mortgage interest deduction is largely phased out.

• Paying off high-interest debt like mortgages can be a good investment if you have the funds, as it provides a risk-free return equal to the interest rate.

• Cashing out retirement funds to pay off a mortgage can make financial sense if you have enough other retirement savings, as it eliminates the drag of the interest rate differential. But it requires careful analysis of total retirement needs.

• The decision depends on multiple factors like mortgage balance, rate, years to retirement, other savings, and more. There is no one-size-fits-all answer. The key is to run the numbers for your specific situation.

• Paying off your mortgage with retirement account assets can provide a large gain in lifetime spending due to the interest rate differential - retirement accounts typically earn higher returns than mortgage rates.

• Homeownership provides a tax advantage over renting because imputed rental income (the rent you effectively pay yourself by owning) is not taxed. This can increase lifetime spending by 1-3% for moderate to high earners.

• Owning a home reduces longevity risk because your housing costs are fixed regardless of rent increases, and home equity can help cover large end-of-life medical expenses like long-term care. Strategies like reverse mortgages allow seniors to access home equity.

• Downsizing your home in retirement can free up equity that can be invested and generate retirement income. Trading down to a smaller home in a lower-cost area is often a smart financial move.

• Homeownership has risks like damage from natural disasters, but insurance can help manage these risks. The key benefits of homeownership tend to outweigh the risks for those who can afford it.

In summary, homeownership, if affordable, provides valuable financial security and tax benefits that can substantially increase retirement wealth. Strategically using home equity is a key retirement strategy.

• Selling your house and using the proceeds to pay for a nicer eldercare facility is a common strategy for upper-middle-class households to gain access to decent long-term care. However, the funds may run out quickly with an extended stay.

• Long-term care facilities promise that when your funds are depleted, they will accept Medicaid and let you stay. So your home equity becomes the entrance fee.

• This contradicts the standard advice to gift assets ahead of time to avoid Medicaid clawbacks. But it illustrates there is a market to use home equity to gain access to better facilities.

• Additional housing cost-saving strategies:

• Cohabitation - Sharing housing raises living standards due to economies of scale. Young adults increasingly live with parents.

• Renting out your home - High imputed rents make it worthwhile to rent out your place and pocket the proceeds. Enables travel or home renovations.

• Downsizing - Cutting housing square footage in half or more can dramatically reduce costs if rightsized to needs.

• Tapping home equity - Reverse mortgages and home equity lines let seniors access equity without moving.

• Downsizing to a smaller home can significantly increase retirement spending, especially when interest rates are high. For example, a couple could gain over 5% more in lifetime discretionary spending by downsizing from a $1M home to a $500K home.

• Moving to a low-tax or no-tax state like Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, or Wyoming can save significantly on state income taxes.

• Freeing home equity by downsizing or taking out a reverse mortgage can provide a large boost in retirement spending. For the example couple downsizing from a $1M to $500K home, spending their released home equity boosts their lifetime spending by over 25%.

• Reverse mortgages allow tapping home equity without having to sell the home, but they are complex products that must be approached carefully. The lender places a lien on the home and is repaid when the home is sold. If the borrower lives past the mortgage term, they may end up losing money overall.

• Strategically using home equity and location changes in retirement can optimize spending, but complicated financial products like reverse mortgages need thorough understanding to avoid pitfalls.

Here are a few key points about reverse mortgages:

• Reverse mortgages allow homeowners aged 62+ to access their home equity as cash while still living in their home, but come at a high cost in fees and interest rates.

• Borrowers can take the cash as a lump sum, fixed monthly payments, a line of credit, or a combination. The loan doesn’t need to be repaid until the homeowner moves, sells, or dies.

• Interest accrues on the loan and fees add up over time, so the amount owed can quickly exceed the home’s value, leaving little or no equity for heirs. This makes reverse mortgages risky if you may need to move soon or want to preserve home equity.

• An HECM reverse mortgage for purchase can help buyers aged 62+ purchase a new home if they sell their existing home that has a reverse mortgage, but it involves taking on another expensive loan.

• Married couples should wait until both spouses qualify age-wise before getting a reverse mortgage to avoid complications.

• Alternatives like downsizing, home equity loans/lines of credit, or renting out rooms can also help tap home equity if needed. Reverse mortgages should be approached with caution due to their high costs.

Here are the key points about housing and reverse mortgages from our discussion:

• Don’t overpay for housing. Define and research your housing market and systematically compare purchase vs rental prices, accounting for your personal preferences.

• Mortgages aren’t a basic housing cost - they’re a financial and tax loser. Pay yours off or down as fast as possible. Cashing out retirement assets to pay off your mortgage can make financial sense.

• Homeownership provides valuable tax benefits unrelated to having a mortgage.

• Sharing housing costs via cohabitation, subleasing, Airbnb, etc can dramatically lower costs.

• Downsizing can release trapped home equity and raise living standards.

• Reverse mortgages like HECMs allow you to access home equity but have risks - high fees, moving requirements, declines in home value, etc. Consider less costly alternatives like leasebacks.

• HECM lines of credit can provide inflation protection but are expensive. Lump sum HECM payouts can reduce inflation exposure.

• If using a reverse mortgage, be very cautious if spouse is under age 62. Consult a lawyer on protections.

Here is a summary of the key points about marrying for money:

• Marriage has long been an economic transaction, with practices like bride-prices and dowries treating spouses as commodities. This continues today in more subtle ways through dating sites.

• When considering marriage or partnership, it’s important to accurately assess the full economic resources each person brings - assets, debts, earnings potential, etc.

• Marrying your financial equal brings economies of shared living, raising living standards around 25% through synergies like housing. However, there can be a small “marriage tax penalty”.

• Marrying up economically brings additional gains through combining with someone of greater means. This can improve living standards significantly.

• Look for a partner with robust earnings potential, ideally in a career with upward mobility and recession resilience. Seek someone open to economizing and financial planning.

• Personality compatibility and character still matter tremendously for marital success and happiness. But seeking someone financially compatible can bring lifestyle benefits.

• Approach marriage pragmatically but ethically, being upfront about expectations and contributions. Utilize prenups to protect both parties’ interests if needed.

Here are a few key points from the summarized passage:

• Marrying your clone (or partnering with them) can raise your living standard by over one-third due to sharing resources and economies of scale. However, there are some marriage taxes that slightly reduce this gain.

• The benefits of marrying your clone are larger for lower income individuals. For higher earners, the marriage tax penalties are more significant, making partnering more advantageous.

• Marrying someone much richer or poorer than yourself can greatly affect your living standard. A poorer spouse may benefit tremendously while a richer spouse takes a hit to their standard of living.

• Trophy spouses exemplify marrying someone much richer. While frowned upon by some, love can overcome financial differences. Also, the superrich may not notice reductions to their already-high living standard.

• Even spouses with similar incomes may specialize, with one focusing on child-rearing and the other on working. This traditional split can be financially optimal, especially when children are young.

In summary, marrying or partnering your clone can substantially raise your living standard, but marrying up or down financially can have major impacts as well, for better or worse depending on which spouse you are. Love and specialization can overcome income differences.

Here is a summary of the key points in this chapter:

• Divorce is very common, with around 40-50% of first marriages in the U.S. ending in divorce. However, the divorce rate has declined in recent decades.

• There are significant financial costs to divorcing, including legal fees, setting up separate households, and division of assets. Staying unmarried or delaying marriage can avoid these costs.

• For those who do marry, a prenuptial agreement can specify in advance how assets will be divided in case of divorce, avoiding prolonged legal battles.

• The division of retirement accounts and future Social Security benefits can be complex in divorce. Consulting a lawyer knowledgeable in this area is important.

• Alimony/spousal support used to be more common but has declined significantly over time. It is now intended as a short-term bridge for the lower-earning spouse.

• Child support and child custody are also important considerations in divorce involving children. The divorce process should aim to be as amicable as possible to avoid lasting damage to kids.

• Overall, divorce should be carefully weighed in terms of financial and emotional costs and benefits. Staying married also has costs, so each couple must decide what is best for them.

Here is a summarized version of your text to Oscar Wilde:

Marriage is a risky business with a high divorce rate, but be careful about ending it. Divorce can severely reduce your standard of living. Before divorcing, do a cost-benefit analysis to determine how much of your standard of living you’re willing to sacrifice. Factor in the impact on any children. Also consider the economies of shared living - the ways in which married couples can live more cheaply together than apart. Compare your standard of living if divorced versus if still married. If the drop is more than you’re willing to accept, it may be better to stay married. Make sure you hate your spouse enough to justify the financial loss. Divorce is expensive, so don’t do it lightly. But if the costs are worth it to you, then go ahead.

Here are a few key points summarizing the text:

• Calculating the financial costs of divorce is complex, with many variables like alimony, child support, and division of assets/debts. Be very cautious in your financial planning.

• Alimony laws vary dramatically by state, so choose your location wisely if divorce is likely. Longer marriages generally mean more alimony for a longer duration.

• Timing of divorce matters for things like alimony duration, Social Security benefits, and incentive for the higher-earning spouse to pay. Don’t divorce too early or late.

• Hiring divorce lawyers can be very expensive and may incentivize fighting vs compromise. Consider mediation or representing yourself if amicable.

• Your spouse’s retirement can significantly impact alimony payments, so get this codified properly in your settlement.

• Cohabiting or remarrying after divorce can terminate alimony, so be aware of the rules.

The key is to carefully calculate the financial costs, know the laws, time divorce strategically if needed, and aim for an amicable settlement. The financial stakes are high.

• Getting divorced often leads to long, expensive legal battles that enrich lawyers but drain the finances of both spouses. Judges have a lot of power to decide divorce settlements, and their personal biases can influence outcomes.

• To avoid an unpredictable court battle, try to work out a settlement yourselves with software or a mediator before involving lawyers. Focus on reaching a fair agreement rather than maximize your share.

• Fairness means equalizing the post-divorce living standards of both spouses, taking into account factors like future earning ability, who raised the kids, etc. Alimony guidelines differ widely by state and are often arbitrary.

• Before anything else, agree on an equitable ratio for your future living standards based on the length of your marriage. Then calculate how much each spouse can spend given expected income without alimony. Factor in taxes, social security, and life expectancy.

• The goal should be a reasonable standard of living for both parties, not maintaining your married lifestyle. Be willing to compromise. With good faith and fairness as the goal, an amicable settlement is often possible without an ugly legal fight.

Here are a few key points summarizing the advice on borrowing for college:

• Avoid taking on debt for college if possible. Student loans can be very risky and burdensome. Explore lower-cost educational options.

• If you do take out loans, borrow as little as possible. Prioritize federal subsidized loans over unsubsidized loans or private loans.

• Calculate the amount you can reasonably afford to pay back based on your expected future income, and don’t borrow more than that.

• Consider prospective majors and careers carefully. Will your choice lead to a job that allows you to comfortably repay the loans?

• Don’t take on parent PLUS loans or cosign private loans for your children. This debt can be crushing and lasts into retirement.

• Instead of borrowing, find ways to reduce college costs like attending community college for 2 years, becoming a resident assistant, or taking extra classes to graduate early.

• Scholarships, work-study, and other ways to pay can help avoid loans. But loans should be a last resort, not the default option.

The key is to think through college borrowing very carefully, as student debt can severely limit finances and options for years to come. Avoid loans if at all possible, and if taking them, borrow minimally and wisely.

• College students, especially minorities, are taking on large amounts of debt. Collectively they owe $1.6 trillion and their parents owe over $100 billion.

• Many students are still paying off loans 20 years after graduation. One student in the author’s class owed $120,000 for an art history degree, with little job prospects to repay the loans.

• The average debt among recent college graduates is around $33,000 but may be higher when accounting for unknown parental debt.

• Shockingly, 40% of college entrants never graduate, meaning much of the borrowing was for naught. The Dept. of Education should warn students of this high dropout risk.

• Student loans are considered “fake aid” compared to grants, scholarships, and work study programs which don’t need to be repaid.

• Defaulting on loans can be disastrous with collection fees, wage garnishment, and seized tax refunds.

• Sticker prices for college are astronomical but the actual net cost can be much lower with scholarships, aid, and strategies to maximize value per dollar spent.

• Choosing a college involves comparing net costs, graduation rates, and potential future earnings. Consider starting at community college.

• Focus on minimizing loans, comparing interest rates, and income-based repayment plans when borrowing. The key message is to avoid debt if at all possible.

• College dropout rates are high, with only about 3 in 5 students graduating within 6 years. This reflects a diverse student body with varying financial resources and interests.

• Graduating college is the exception, not the rule - only 36% of Americans have a bachelor’s degree. There are many paths to success besides getting a degree.

• College is very expensive, with top schools costing over $74,000 per year. Borrowing large amounts is risky given uncertain job prospects after graduating.

• Avoid borrowing for college if possible by considering less expensive schools. Significant financial aid in the form of grants and scholarships can make the net price much lower than the sticker price.

• Assess your risk of dropping out before deciding where to attend. Start small if uncertain, like at a community college, then potentially transfer credits later.

• The key is to weigh the costs versus expected earnings boost from a particular school. Prestige helps but is not everything. An affordable education with less debt is often the better economic choice.

• Boston University’s published maximum net price is $25,900, which is far higher than the advertised price of $7,500. This shows that the true cost of attending can be much higher than advertised.

• Student debt can be a major problem even for middle-income families. If you borrow the maximum each year, you could leave college with over $100,000 in debt.

• The maximum net price depends heavily on your family’s income and assets. Those with high incomes and assets may pay close to the full $78,000 sticker price.

• Comparison shopping can reveal surprising bargains. BU may be cheaper than UMass Amherst for some students, despite BU’s higher ranking.

• College financial aid formulas impose high implicit taxes on income and assets. There are questionable steps families can take to avoid these.

• College “award” letters are misleading, treating loans as “awards.” Key loan terms are not disclosed.

• Defaulting on student loans leads to severe consequences like garnished wages and seized tax refunds. Student debt is extremely difficult to discharge.

• Student loan debt is extremely difficult to discharge through bankruptcy. Unpaid interest and fees continue accumulating, so the debt can spiral out of control. This is illustrated by the case of Chris, whose $79,000 in loans ballooned to $236,000 after 17 years of wage garnishment.

• High school students and parents often don’t understand the implications of taking on this debt. Many don’t realize the loans can’t be discharged through bankruptcy.

• Given the dangers, it’s worth questioning if high-priced schools are worth borrowing for. Educational pedigree and prestige are not key determinants of career success. What matters most is effort, learning on the job, and solving problems.

• Attending an elite university is often not worth the high cost of tuition. Dale and Krueger’s 1999 study found future earnings don’t depend on whether someone attended an elite school, once factors like GPA are controlled for. Paying full price for an elite education is often a waste of money.

• Some elite schools may provide value through specialized training or recruiters’ preferences. But most students pay high tuition at elite schools primarily for prestige, which does not guarantee career success. There are ways to attend elite schools affordably through financial aid or transferring.

The key points are:

• College rankings like those from U.S. News are flawed and don’t necessarily reflect the quality of education provided. Focus instead on the research quality of faculty in your desired field of study.

• You can find excellent education for much less than elite schools charge by identifying lesser-known colleges with top faculty in your field. Do your own research on faculty publications to determine quality.

• Once enrolled, seek out the best professors at your school, even if not the most popular. Take courses from top research faculty.

• Supplement your in-person education with free online classes from elite schools through platforms like Coursera. You can get an elite education for free while earning your degree from an affordable school.

In summary, you can strategically get an elite-caliber education for much less by being an informed consumer, taking advantage of online resources, and focusing on the research credentials of professors over general college rankings or amenities. Seek out educational quality over brand names.

• Consider getting a degree online from a prestigious university for low cost. You can take individual courses and get certificates to signal skills to employers.

• Attend a community college or low-cost university for the first 2 years, then transfer to an elite university to finish your degree. This allows you to get the prestigious degree for much lower total cost.

• Be very careful taking on student debt. Over 20% of borrowers are unable to repay their loans. Exhaust grants, scholarships, and work options first.

• Take advantage of federal grants like Pell Grants and state grants. Also apply for college and organizational scholarships.

• Federal student loans are better than private loans. Prioritize Direct Loans, then PLUS loans. Consolidate loans at the end for easier repayment.

• Explore loan forgiveness programs and income-based repayment plans to ease debt burden.

• Pay off highest interest rate loans first. Consider extending loans at low fixed rates. An income-dependent loan can help match payments to income.

• Your goal should be to minimize debt while maximizing education quality and signaling to employers. Mix smart strategies to achieve this.

• Federal student loans like Direct and Grad PLUS loans have fixed interest rates ranging from 2.75% to 5.3%. Private student loans can have much higher variable rates from 3.5% to 14.5%.

• Borrowing at high interest rates can significantly reduce lifetime spending and lower living standards. An example is given of someone borrowing $100,000 at 7% interest, which costs them an extra $62,000 over the loan term and reduces their annual spending by 7% for life.

• There are fixed and income-driven repayment plans for federal loans. Fixed plans spread payments over 10-30 years. Income-driven tie payments to income and provide loan forgiveness after 20-25 years, but you pay taxes on the forgiven amount.

• Income-driven plans can lead to paying much more than originally borrowed if income rises, due to unpaid interest capitalizing. Getting married combines spouse’s income too.

• High payments under fixed or income-driven plans can make it hard to save, buy a home, etc. in early career when incomes are lower. This highlights how bad aid can negatively impact finances and lifestyle.

Here’s a recap of the key points:

• Student loan debt totals over $1.6 trillion and is the largest form of debt after mortgages. Two-thirds of college students borrow to pay for school.

• Most loans are federal, with relatively low interest rates for undergrads and higher rates for grad students and parents. Undergrads are limited in federal borrowing, forcing some to use private loans at very high rates.

• Parent PLUS loans are increasingly common but can create issues if expectations around repayment are unclear between parents and kids.

• Not graduating is a huge risk that can leave borrowers with debt but no degree. Even graduates average $33k in debt, with some exceeding $50k.

• Excessive borrowing can limit career options and be very risky if graduation odds are low. The key is to minimize costs by shopping for net prices, earning certificates online, and transferring schools.

• Grants and scholarships are “good” aid that doesn’t have to be repaid. Loans are “bad” aid that become burdensome debts. Don’t be fooled by total “financial aid” figures.

• Student loan interest rates exceed investment returns. Paying off high-rate loans quickly can be wise, but will limit cash flow.

• Income-driven repayment plans seem beneficial but can increase total costs if income rises over time. Weigh options carefully when consolidating/refinancing loans.

Here is a summary of the key points about investing like an economist:

• Conventional investment advice is often flawed and can lead you astray. Many “experts” underperform the market.

• Economics focuses on maximizing your living standard over time, not investment performance. Your future living standard is uncertain but largely under your control.

• Picture your possible future living standard paths as snakes fanning out from your current living standard. They wiggle up and down based on random events.

• Most paths cluster near your typical living standard. Some trend higher or lower over time. Together they form a cone shape.

• You want to raise your living standard cone by saving and investing while limiting downside risk. This requires controlling spending, not taking excessive risk, diversifying, etc.

• Avoid conventional advice that has you making four economic mistakes: underinsuring, overinvesting in one asset, ignoring living costs, and focusing on averages not risk.

• Instead, insure, diversify, think marginal, and consider risk. Your goal is to raise your living standard over time, not beat the market.

• Conventional investment advice is flawed because it encourages overly risky and expensive investments based on incorrect assumptions about saving, spending, and investing.

• It takes your current saving as appropriate even when it’s likely too low. It puts saving on autopilot so your living standard fluctuates when income changes.

• It lets you set an unrealistic retirement spending target not based on what you can actually afford. This spending target is also on autopilot.

• The conventional advice leads to expensive investments that raise the Monte Carlo success rate but increase downside risk.

• You may end up with lots of unspent wealth at death, rather than smoothing consumption.

• Paying even small fees compounds to a large reduction in sustainable spending. But don’t automatically fire your advisor, as they may provide other valuable services.

• The author acknowledges advisors are trying to help and are working within the flawed industry tools and incentives. The goal is better economics-based planning, not necessarily no advisors.

• The author also acknowledges his own motives may be scrutinized, but his goal is to educate based on economics research, not sell products.

• The author acknowledges he has a conflict of interest in promoting economics-based planning as his company sells related software. However, he provides evidence that conventional financial planning is not endorsed by PhD economists or taught in top economics programs.

• Investing in stocks and other risky assets widens your living standard (LS) cone over time, as returns are unpredictable and follow a random walk. Higher returns don’t necessarily predict higher future returns.

• If you do well in the market, you should spend somewhat more. If you do poorly, spend somewhat less. The adjustments depend on your risk aversion.

• Changes in your LS from investment returns will evolve like a random walk, spreading out your LS cone. The more you invest in stocks, the more your cone spreads.

• Some people naturally have wider LS cones based on their resources. Stocks widen the LS cone dramatically for those with more assets.

• You want to raise your LS cone and narrow it where possible through safe means like guaranteed income sources. But investment risk will always widen it.

Here is a summary of the key points about raising your living standard cone:

• Spend cautiously over time to leave yourself better prepared for bad investment returns. This tilts your living standard cone upward.

• Diversify your asset holdings across many types of investments to reduce risk without reducing expected return. Index funds make diversification easy and cheap.

• Pay off debts like mortgages to reduce obligations and narrow your living standard cone. Fixed spending commitments are like debts.

• Adjust your mix of safe versus risky assets based on your risk tolerance. More risk averse people should invest more safely.

• There is an optimal asset allocation that maximizes expected living standard while accounting for risk tolerance. This allocation changes over your lifetime.

The key ideas are to spend cautiously, diversify holdings, reduce debts/obligations, and choose your asset mix based on risk tolerance, with the goal of tilting your cone up and narrowing it. The optimal asset mix changes over your lifetime.

• The richer you are, the more conservatively you should invest. The poor should take more risks with their money.

• Young people should invest heavily in stocks, not because stocks are safe long-term but because their human capital (future earnings) is like a bond.

• As retirees spend down assets, they should invest a greater share of their dwindling assets in stocks to maintain their desired asset allocation.

• Workers accumulate job-specific human capital over time, making them increasingly exposed to their employer’s risks. To offset this, workers should invest less in their employer’s stock over time.

In summary, your optimal asset allocation depends on your total resources, not just your financial assets. As your resources and life situation change, your optimal asset mix will as well. Following standard age-based allocation rules can lead to suboptimal investing.

You have upside and downside risks related to your company’s performance. You can’t directly insure against your company failing, since that would create bad incentives. But you can take steps to protect yourself:

• If you own your company’s stock, sell it to diversify and reduce your exposure.

• Invest in your competitors or companies that would benefit from your company struggling. This may seem disloyal but is prudent financially.

• Time the overall stock market for risk rather than return. When volatility rises, reduce your exposure to risky assets like stocks.

• Do “upside investing” where you establish a safe standard of living floor then take risks above that. Treat stock investments like casino gambling - be ready to lose it all, and only spend gains after the risk period ends.

• Use inflation-protected bonds like TIPS or I-Bonds for your safe floor. I-Bonds are better since the government sets the yield rather than the market.

The key points are to protect your standard of living against company-specific and market risks, while still participating in upside through prudent strategies. Safe investments like I-Bonds help establish a floor.

1. Save more, spend less. Make saving easier by using automatic deductions and visual reminders. Reduce spending on things you won’t remember and put the savings toward goals.

2. Pay down high-interest debt. Start with credit cards, then other debts like student loans and mortgages. Pay more than the minimum each month.

3. Take advantage of employer matches for retirement accounts. It’s free money, so contribute at least enough to get the full match.

4. Contribute to IRAs and 401(k)s. Max them out if possible for tax-deferred growth. Choose low-cost index funds for better returns.

5. Buy I-Bonds and TIPS. They are safe investments that protect against inflation. Ladder them for steady income streams.

6. Invest early and often. Time in the market is key, so start young and keep investing regularly. Dollar-cost average into index funds.

7. Diversify globally. Include emerging markets for growth and developed markets for stability. Rebalance to buy low/sell high.

8. Don’t try to time the market. Stay invested through ups and downs instead of buying/selling based on speculation.

9. Manage taxes smartly. Use pre-tax accounts, harvest losses, donate appreciated assets, and avoid short-term capital gains.

10. Insure key risks. Get term life, disability, health, auto, home/renters, and umbrella insurance to transfer big risks.

The other tips cover things like avoiding fees, purchasing experiences over objects, negotiating prices, networking, advancing your career, starting side businesses, learning continuously, and leaving a legacy. The key is to implement as many smart money habits as possible. Small changes compound over time into enormous benefits.

• This book provides 50 essential money management tips across a range of financial topics. The tips are not presented in any particular order, which highlights that there are many ways to improve your finances.

• Key advice includes: invest in yourself by paying off debt; use retirement accounts strategically; delay Social Security benefits; avoid student loans; diversify investments; shop around for better deals on homes, jobs, etc.; measure lifestyle decisions in terms of impact on living standard; optimize divorce settlements cooperatively; tap retirement accounts before Social Security; share living expenses; play the stock market cautiously.

• The tips may seem counterintuitive because they are based on economic principles, not emotions or conventions. But economics provides insights into how to truly improve personal financial health.

• Americans tend to undersave, retire too early, take Social Security benefits as soon as possible, fail to utilize home equity, and make other suboptimal financial decisions. This book provides the medicine needed to remedy poor financial practices.

• The closing chapter summarizes 50 key tips, which may seem puzzling or crazy. But they are underpinned by a century of academic research on personal finance. Economics advice delivers real cures, even if hard to swallow at first.

Here are the key points from the passage:

• Do regular financial checkups on saving, career, insurance, marriage/divorce, housing, retirement timing, and investments to optimize your financial wellbeing.

• For saving, compare your actual discretionary spending to the recommended level based on your lifetime resources. Adjust spending up or down accordingly.

• For career, routinely consider alternative careers/jobs that may make you happier. It’s never too late to switch.

• For insurance, calculate the life insurance needed to maintain your survivor’s standard of living if you die. Adjust coverage as needed.

• For marriage, weigh the financial costs/benefits of potential partners. For divorce, calculate the financial impacts.

• For housing, weigh the lifetime benefits against the living standard costs of moves/purchases.

• For retirement timing, weigh earlier retirement against lower lifetime living standards.

• For investments, model different portfolio risks/returns to find the optimal balance of upside potential and downside protection for your living standard. Conservative assumptions are key.

• Use economics-based planning software like MaxiFi to efficiently run these analyses if doing them manually seems too daunting.

• Making your own financial calculations (rather than relying on simple rules of thumb) enables you to truly understand and control your financial future. Financial planning software like MaxiFi makes these calculations easy.

• MaxiFi handles complex analyses like projecting inflation-adjusted future earnings, modeling cash flow constraints, calculating taxes and Social Security benefits, and analyzing investment returns.

• Using MaxiFi to run different scenarios is exciting - it allows you to find safe ways to raise your living standard and see the impact of various lifestyle choices.

• The author warns that financial planning with MaxiFi can be addictive once you realize you can control and improve your financial welfare. He has seen many people tweak their plans daily.

• In short, MaxiFi provides a “money magic wand” to gain control over your finances. The book aims to help the reader make their own financial “magic.”

Here are concise summaries of the key points from each of the articles and sources you provided:

1. The article argues that AI is threatening radiologists’ jobs, as deep learning algorithms can analyze medical images more quickly and accurately.

2. The article states that 70-80% of jobs are found through networking, emphasizing the importance of connections for finding employment.

3. The study found certain regions like Indiana are highly vulnerable to job loss from automation, trade, and urbanization.

4. The article reports that up to 25% of US jobs are vulnerable to offshoring, especially jobs involving predictable physical work.

5. The report shows distressed regions with job loss and low growth are concentrated in the US heartland.

6. The book excerpt explains how presidents like FDR used marriage to gain economic and social advantages.

7. The calculator helps estimate spousal support payments based on length of marriage and income differential.

8. The article notes student loan debt has ballooned to $1.6 trillion, exceeding credit card and auto debt.

9. The report reveals over half of recent grads are underemployed in jobs not requiring a degree.

10. The article examines modern day debtors’ prisons where people unable to pay fines and fees are jailed.

Here is a summary of the key points from the article:

• Debtors’ prisons, where people are jailed for unpaid debts, were abolished in the U.S. in the 1800s. However, some states and cities still effectively operate debtors’ prisons by jailing people for unpaid court fines and fees.

• In Mississippi, hundreds of people are jailed each year when they fall behind on court fine payments. Many are too poor to pay, creating a modern version of debtors’ prison.

• Advocates say jailing people for fines they can’t afford is unconstitutional. The ACLU has filed lawsuits against cities in several states to stop the practice.

• Opponents argue fines fund local courts and jailing people who don’t pay is sometimes the only way to get them to take fines seriously.

• Some places have reformed policies to only jail willful nonpayment and give alternatives for the poor. But practices still disproportionately impact the poor and minorities.