Questions About Autographs, 401(k) Contributions, Trusted Financial Advice, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Pulled out in a panic
2. Collection of old autographs
3. Saving enough for retirement?
4. Trusting bloggers for financial advice
5. The cost of high expenses
6. Inexpensive way to learn chess
7. Overcontribution to 401(k)
8. Worried about stock market
9. Questionable stock market advice
10. Inherited piano
11. Lesson from grandparents
12. Myers-Briggs personality type

I’m writing this while sitting on the couch at my in-laws. Everyone is asleep except for the dog, who is curled up next to me. I can smell some kind of baked good that was left out overnight to rise.

It feels warm. It feels like family. It feels like home.

On with the questions.

Q1: Pulled out in a panic

So I know you encourage people to invest for the long term and avoid trying to time the market. But let’s just say hypothetically that back in October 2018 that I pulled my 401k out of the market into a fixed account. Are there any things you would use to decide when to put the money back into the market. Right now it is looking like it was a smart/lucky move and I have easily avoided a 10% loss if not more. I realize I ignored your original rule to invest for the long term and don’t time the market. But in my situation are there any market indicators you would look to before moving from a guaranteed fixed account back into the market?
– James

Yes, you were lucky to have pulled out in October because the stock market happened to drop about 15% since. The thing is, as with most stock market corrections, it’s a normal correction that’s basically impossible to predict. You just happened to pull out right at the exact moment to benefit.

Will it go down more? Maybe. Are we at the bottom and the rebound is about to commence? Maybe. The thing is, it doesn’t really matter one way or another – stocks are a long term investment for everyone who isn’t a professional investor and thus if you’re relying on stocks for long term growth for retirement, that’s where your money should be regardless of ups and downs and normal bumps and corrections. Timing doesn’t work.

In your shoes, I put that money right back into stocks assuming that you’re more than ten years from retirement. Then I just sit on it and forget it. You’re basically now able to buy 10% more stocks with that money than you sold, but that’s largely due to a lucky call. It could have easily gone the other way. Stocks (ideally in the form of index funds) are a “buy and hold” for pretty much everyone who isn’t a full time professional investor.

Q2: Collection of old autographs

In a recent estate sale I bought a big box of books for just a few dollars. I brought them home and went through them and found a couple of journals from the estate in there which I returned. I also found what seems to be an autograph book that was used in the 50s and 60s and has a bunch of autographs from people like Frank Sinatra and Dean Martin. It’s pretty cool and seems like it would have value but I’m not sure what to do with it.
– Jerry

The first thing I would do is get the autograph book authenticated through a service like JSA. You want to be sure that the autographs are authentic and legitimate and not just someone imitating signatures or something.

Assuming they’re authentic, those are some pretty heavy hitting autographs and probably have some significant value. You’d probably want to move on to talking to the memorabilia representative of a reputable auction house. Explain that you have an autograph book that’s authenticated and list the signatures included and ask whether that would be something they’d be interested in handling.

This may be worth a significant amount, or it may not be worth much at all, but those are the steps I’d follow to figure out which side of the coin it’s on.

Q3: Saving enough for retirement?

Proceeds from the sale of my home will partially be used to remodel my new home from a 1970s replica to modern day. I’d like to take half of the proceeds and save it in a 3% CD. My question is—at what point does quality of life (ex. Dream trip to Italy) outweigh growing retirement? How will I know when I have enough retirement savings to say ciao while I am still young?
– Cleve

The honest truth is that you don’t know, at least not for sure, because no one knows what the future holds.

The best estimate I can make is that if people start saving 10% of their income for retirement as soon as they start working at a full time job, they should be in good shape to retire at age 67 (when Social Security will likely kick in for them).

If you haven’t started yet and you’re older than that, the percentage should be higher. My really rough estimate is that you should start saving about 12% a year if you’re 30 and haven’t started yet, 15% a year if you’re 35 and haven’t started yet, and 20% a year if you’re 40 and haven’t started yet. Beyond that, you should probably assume that you’re either going to have some big spending cuts when you retire or you’re going to be saving a much larger percentage of your income.

You can always choose to save less, of course, but that likely means either a leaner retirement or working until you’re older. Saving more means you can retire earlier or have a fatter retirement (I know a fellow who retired around age 72 or so who actually made more when he retired).

Q4: Trusting bloggers for financial advice

How can you say that someone should trust a financial blogger such as yourself? The internet is loaded with fake news and salespeople selling snake oil.
– Tim

For one, I’m not selling anything. Everything I write is done without a sales pitch or anything else; it’s just supported by advertisements around the edges, like a newspaper or magazine.

For another, I wouldn’t expect you to wholeheartedly accept any advice I write without verification. You shouldn’t take action on anything you read online (or offline) without getting the info from several sources. The Simple Dollar should be a starting point, not the final destination; it should be one source among many.

I do not have all the answers, nor do I claim to. I’m just sharing my experiences and what I know so that people can use that to make better financial decisions and make a better life for themselves. You absolutely shouldn’t take my word for anything I write and you should look at lots of sources before making big decisions.

Q5: The cost of high expenses

My company just changed the 401K administrator. We went from 0.01-0.05% in expense ratio on the funds to 0.5-0.6%. The worst part is that this was sold to the employees as something worthy due to active management. We have one of the better 401K plans in the industry where if the employee contributes enough to get maximum match we will end up with about 14%. However the latest development with the expense ratio is throwing the equation off. My estimate is that we will lose about $250-400K over 30 years in fees & opportunity. My HR has shown interest in listening to me and asked to provide details. Can you suggest the best way to show the effects of high expense ratio with some credible research sites, calculators, industry trend, etc.
– Alex

I think the easiest way to explain it is with numbers.

Let’s say you have two investments that are identical. One has an expense ratio of 0.01% and the other has an expense ratio of 0.5%. You invest $10,000 in each and they both return 7% per year before expenses.

After the first year, the first investment is worth $10,698.93 and the other one is worth $10,646.50. Not a huge difference, right?

Well, let’s look at the 10 year mark. The first investment (the one with a 0.01% expense ratio) is worth $19,651.85 and the second investment (the one with a 0.5% expense ratio) is worth $18,709.78. The bad expense ratio has cost you $942.08. That’s almost 10% of your original investment down the tubes! It only gets worse from there.

A bad investment ratio is only fixed by an investment that’s earning far better returns, and the likelihood of that is extremely small. Take a look at the long term numbers of the high expense ratio investment. Does it frequently beat the market? If not, it’s really not worth it.

Q6: Inexpensive way to learn chess

I noticed that one of your readers asked about cheap ways to learn chess. I highly recommend the website: https://www.chesskid.com/. It has great video tutorials that teaches you how to play chess. You can also practice playing on the website. If you try to make an “illegal” move with a chess piece, the website won’t let you do it, which teaches you what you can do with each piece. You can also select a level for the computer to play with you (beginner, intermediate, advanced). There is also a section where you can practice your tactics or play set positions. I’ve used it myself to learn chess and found it quite enjoyable and entertaining.
– Chloe

This looks like a really solid chess resource for beginning players.

Chess is a great frugal hobby. It really only requires a chessboard and some time and, ideally, an opponent. As you get better, you might want to add a few small things like a few chess books (which you can get from the library at first), a clock, and some books.

My youngest son is currently rather enamored with chess. He’s usually coaxing someone into a game several times a day.

Q7: Overcontributions to 401(k)

My new employer just made a mistake with my 401(k). From my bonus it took $4200 and applied it to my 401(k). By the end of the year that amount will have put me about $3000 over the $18500 employee contribution limit. I intend to ask my employer to cancel my last contribution so that I will only be about $2700. But what happens after that is what concerns me the most.
– Kevin

Contact your plan administrator and tell them you made an “excess deferral.” They will send the excess money to you as a “corrective disbursement.” You’ll pay taxes on that money and then pocket the rest.

If you don’t have a Roth IRA, you can use that disbursement to start one if you want to keep that money in retirement savings.

Be sure, whatever you do, that your income taxes on that disbursement are taken care of. Otherwise, you may have a surprise coming in April.

Q8: Worried about stock market

67 years old bad health 28k in 401k lost 4000 in the last week all in a S&P Index Fund. Should I cash out? It is the only money I have due to job loss and starting over in my 50s.
– Jim

Without knowing the full picture of your situation, I can’t exactly suggest what you should do.

It sounds like your situation is that you’re retired and on Social Security with a small amount in your 401(k). In that situation, you need to decide what you intend to use that money for. Is it an emergency fund for you? Are you going to use it for a significant purchase at some point?

Whatever you intend to use it for, estimate how far down the line that expense is. If it’s more than ten years, leave it in the S&P index fund. If it’s less than ten years, leave it in the 401(k) and move it into a bond fund or a money market fund. Don’t pull it out of the account until you actually need the money.

Q9: Questionable stock market advice

Just got your weekly email and was really dissapointed with “Worried about stock market….” article. There is no real message in your article, it’s just “simple words”, just “noise”. If people have their retirement funds in stock market because (I don’t), it’s because they read sites like yours…and when they’re seeing their money disappear – you say “oh, don’t pay attention…it doesn’t matter if you loose you retirement…keep saving and you’ll be fine”. They will not be fine and you know it. “Don’t lose money…” – it’s basic.
– Eric

My stock market advice is very simple and straightforward.

If you are more than ten years from using money, it should be invested aggressively – a stock market index fund is a good choice. If you are less than ten years from using money, it should be in something less aggressive, like a bond index fund or a money market index fund.

It doesn’t really matter what the individual markets are doing at the moment. They’re going to go up and down over time, particularly more aggressive investments like stocks. The thing is, in general, over a longer time scale, more aggressive investments (like stocks) going to go up at a faster rate than less aggressive ones (like bonds).

That’s it. When you’re more than ten years from your goal, put your money into something aggressive, like stocks. When you’re less than ten years from using that money, move it to something less aggressive, like bonds.

I’ve been giving that advice when the stock market was skyrocketing and I’m giving it now and I’ll give it again when things rebound. That’s because it’s principle-based and has nothing to do with the momentary rises and drops of markets.

Q10: Inherited piano

I enjoy playing piano as a hobby and occasionally play at church as a backup. I live in an apartment and have a small keyboard. My grandmother died and heft her Steinway to me. I have no room for it in my apartment and couldn’t get it in here if I tried. I am supposed to take possession of it by February. I am not sure what to do with it. If I had a big house I’d love to own it but for now it would just go in storage and I can’t afford the storage. Should I just sell it on Craigslist?
– Jenny

If I were you, I’d tell your extended family about it and see if any of them want the piano. Simply state that you do not have room for the piano in your apartment and you want to know if any of them want it.

If no one wants it, then sell it. I don’t think anyone will think badly of you for doing so. You really don’t have a place to put it, after all.

Craigslist would be a good way to start unless it’s a truly mint condition piano or it’s a high end model.

Q11: Lesson from grandparents

Spent the weekend at our grandparents for what will probably be the last family Christmas there. They’e getting quite old and simply don’t get around as well. They managed to pull off a big Christmas dinner and beautiful decorations but they just looked exhausted all weekend. I learned that they had spent literally weeks preparing for this and they struggle to do things like mow the yard and have started paying for people to do it. My brother and I decided to just start mowing their yard during the summer – I live about 20 minutes away and can do it every other week.

It got me thinking about how expenses go up when you’re retired not down which seems to go against financial advice. Thoughts?
– Andy

Some expenses definitely go down when you retire. Almost all retirees eat out less and have far lower transportation costs, for example. Their entertainment costs often go down as well.

You are correct in noting that other expenses tend to appear in retirement, but whether those expenses overtake all of the savings depends greatly on the individual. Some individuals do just fine with household tasks for many years and then decline rapidly, while others go through many years where they’re not quite able to handle household tasks without paid help. Some individuals have a great deal of family and neighbor support, while others have none.

It really depends on the situation. I think the general trend is that expenses decline immediately after retiring, but often rise slowly in subsequent years as the kinds of expenses you mention start to come online.

Q12: Myers-Briggs personality type

What is your MBTI personality type? I am an INFJ. Have a feeling that your personality is quite similar: introvert, insightful, and liking to help others. Let us know please!
– Carrie

MBTI refers to Myers-Briggs Type Indicator, a personality profile that splits people into sixteen different types, each represented by a four letter acronym. The test differentiates people based on four principal psychological functions – sensation, intuition, feeling, and thinking.

I’ve taken the test several times and always came up as an INTJ (introversion, intuition, thinking, judgment) or INTP (introversion, intuition, thinking, perception). I’ve been told that the I and N are both really obvious when interacting with me, but the T and the J (or P) aren’t as obvious.

I don’t put a whole lot of weight into the test, but it is an interesting summary of an individual’s personality.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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