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Investing Blog Roundup: Bogleheads on Investing Podcast (Estate Planning)

Rick Ferri recently invited me back on the Bogleheads on Investing podcast to discuss some of the topics covered in my recent book After the Death of Your Spouse: Next Financial Steps for Surviving Spouses. We were also joined by estate planning attorney Ryan Barrett. You can find the podcast below, as well as on any of the other major places you’d find a podcast.

Recommended Reading

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Does This Count as Market Timing?

A reader writes in, asking:

“I am new to really paying attention to investing. Most sources seem to agree that market timing is a bad idea. But then I also have read a lot about buying I Bonds or TIPS because they have high interest rates right now. Why isn’t that market timing? Does market timing only involve stocks?”

“Does _____ count as market timing?” is one of the most common types of investing questions I’ve received over the years writing this blog. The answer, in my opinion, is that it doesn’t matter whether or not an investment strategy “counts as market timing.” All that matters is whether or not it’s a good idea.

Some people will apply the market timing label to any strategy that has anything to do with interest rates or market valuations, thereby declaring all such strategies taboo, despite the fact that there’s a huge variation as to:

  1. The level of risk involved and
  2. The probability of success.

To illustrate what I mean, let’s take a look at a few example strategies, any of which could be described as market timing, depending on who you ask.

Strategy 1: Moving Between Cash and Stocks Everyday

Bob has determined that he cannot afford very much risk, but he still needs high returns to meet his goals. So he decides to move his entire portfolio between 100% cash and 100% stocks from day to day in an attempt to catch the best days in the market and miss the worst ones.

Bob’s strategy relies entirely on predicting what the stock market will do over very short periods, which is pretty much impossible. And if Bob fails, he could experience losses that he cannot afford. This type of market timing is clearly not a good idea.

Strategy 2: Shifting Your Bond Maturities

At a time when interest rates are far below their historical averages, Steve shifts his bond allocation from intermediate-term bonds to short-term bonds. Steve’s thought process is that interest rates are likely to come back up in the near future, and he doesn’t want to experience the larger loss in value that would occur with bonds with longer duration. He plans to wait for rates to come back up, then switch back to intermediate-term bonds.

Steve’s strategy is essentially a guess that interest rates will soon go up. Predicting where interest rates will go in the near future is about as hard as predicting where the stock market will go in the near future. (So this is not, for example, a strategy that I would be interested in using myself.) But a key difference between this strategy and Bob’s strategy above is that if Steve is wrong (and interest rates do not rise any time soon), it’s probably not a disaster for Steve. He just misses out on the slightly-higher returns that he could have gotten by holding longer-term bonds.

Strategy 3: Moving from Stocks to Bonds (Permanently)

Laura is planning to retire in the near future. At the time Laura is making the decision, the last couple of years in the stock market have been good and TIPS yields are high. Laura decides to shift a significant portion of her portfolio out of stocks and into a TIPS ladder.

Laura’s strategy is based on recent market performance and current interest rates, but it doesn’t rely on any prediction at all. It’s simply a decision that current rates are good enough to carry her through retirement with very little risk.

The Point of “Don’t Try to Time the Market”

Because of the taboo we’ve placed on anything that could be described as market timing, investors are sometimes afraid to use all the available information when making their decisions. I do not think this is a good thing.

The point of the “don’t try to time the market” message is simply that new investors need to learn that it’s impossible to predict a) where the stock market is going next or b) where interest rates (and therefore bond prices) are going next.

But it can be OK to make financial decisions based on current interest rates or market values, as long as you don’t have to successfully predict where the stock market or interest rates are going next in order for the decision to make sense.

Investing Blog Roundup: Are Target-Date Funds Good Investments?

When I speak with people who are early in their careers, by far the most common questions I get are:

  1. How do IRAs and 401(k) plans work, and
  2. Which fund(s) should I buy in my retirement accounts?

For question #2, target-date funds are always the first thing I bring up.

Christine Benz of Morningstar wrote recently that, “from where I sit, target-date funds have been nothing short of the biggest positive development for investors since the index fund.”

That’s my point of view as well. They’re not a good fit for every circumstance (most notably, they’re a poor fit for taxable accounts). But they are nonetheless, an absolute revolution of the investment industry, for the better of the client/investor.

Recommended Reading

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How I Actually Use Open Social Security

There are three factors that should be considered in the Social Security filing decision:

  • Actuarial math,
  • Longevity risk, and
  • Tax planning.

Open Social Security looks at factor #1. It takes the user’s inputs — including mortality assumptions — and determines the filing age(s) that would be expected provide the greatest present value (i.e., greatest spending power) over your lifetime(s). But that still leaves factors #2 and #3.

Here’s the wording from the calculator’s “about” page:

The calculator runs the math for each possible claiming age (or, if you’re married, each possible combination of claiming ages) and reports back, telling you which strategy is expected to provide the most total spendable dollars over your lifetime.

Please note that this calculator should not be the only analysis you do, as there are various factors that it does not consider, such as:

The fact that delaying benefits reduces longevity risk and therefore may be preferable even in some cases in which it is not the strategy that maximizes expected total spending, or

Tax planning reasons or other unrelated reasons why it might be better for you to file earlier or later than the calculator suggests.

In other words, the idea isn’t just to take the strategy that the calculator spits out and automatically use that strategy. Rather, the idea is to take the suggested strategy as a starting point, and then see if there’s any reason to adjust.

Longevity Risk

From a longevity risk point of view, delaying is usually the best decision. That’s simply because Social Security lasts your entire lifetime. So if you’re concerned about depleting your savings due to living a long time, delaying is usually wise from that point of view.

However, there are two cases in which that doesn’t apply.

Firstly, some people have essentially no longevity risk. That is, their desired level of spending relative to their accumulated assets is such that they simply aren’t going to run out of money, so a further reduction in longevity risk isn’t very meaningful.

And second, for some married couples (especially those in which one person is very ill or much older than the other), the longevity risk scenario that we’re concerned with isn’t actually the “both people live a long time” scenario but rather the scenario in which one specific person lives a long time. And in those cases, the strategy that best protects the person expected to live longer is usually not for both people to delay but rather for the lower earner to file early.

Tax Planning

Tax planning is always case-by-case, but it’s usually a point in favor of waiting to file, for two reasons.

Firstly, benefits are themselves tax-advantaged. So waiting to file has the effect of increasing your tax-advantaged income.

And second, waiting to file often gives you a longer window of time to take advantage of Roth conversions. (The most common time for Roth conversions to make sense is in the window of years after retiring but before Social Security and RMDs have begun.)

Accounting for All Factors

For most people, a reasonable approach is to look at the strategy suggested by the calculator, and then see how it compares to a strategy in which you wait somewhat longer (e.g., for married couples, a strategy in which both people wait to age 70 or a strategy in which the higher earner waits until age 70 and the lower earner begins their benefit in the same calendar year as the higher earner).

If a) the expected present value of that alternative strategy is, for example, just 1-2% lower than the expected present value of the suggested strategy and b) there’s a compelling reason to prefer the alternative strategy from a tax or longevity risk point of view, then it probably makes sense to use the alternative strategy.

Conversely, when the strategy that’s preferred from a tax or longevity risk point of view has a much lower expected present value than the strategy recommended by the calculator, then it often makes sense to go with the calculator’s recommendation.

Want to Learn More about Social Security? Pick Up a Copy of My Book:

Social Security cover Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less
Topics Covered in the Book:
  • How retirement benefits, spousal benefits, and widow(er) benefits are calculated,
  • How to decide the best age to claim your benefit,
  • How Social Security benefits are taxed and how that affects tax planning,
  • Click here to see the full list.

A Testimonial from a Reader on Amazon:

"An excellent review of various facts and decision-making components associated with the Social Security benefits. The book provides a lot of very useful information within small space."

Investing Blog Roundup: The 4% Rule (Actually 4.3%) with a TIPS Ladder

I’ve been studying retirement planning for roughly 15 years now, and throughout that time a constant topic of debate has been whether a 4% inflation-adjusted spending rate over 30 years (i.e., “The 4% Rule”) is actually safe. And most of the time, that question is impossible to answer except in hindsight.

However, Allan Roth recently demonstrated that with TIPS yields being what they are right now, a TIPS ladder can very safely satisfy a 4.3% real spending rate, over 30-years.

Recommended Reading

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2023 Tax Brackets, Standard Deduction, and Other Changes

The IRS recently published the annual inflation updates for 2023. If you have questions about a particular amount that I do not mention here, you can likely find it in the official IRS announcements:

Single 2023 Tax Brackets

Taxable Income
Tax Bracket:
$0-$11,000 10%
$11,000-$44,725 12%
$44,725-$95,375 22%
$95,375-$182,100 24%
$182,100-$231,250 32%
$231,250-$578,125 35%
$578,125+ 37%


Married Filing Jointly 2023 Tax Brackets

Taxable Income
Tax Bracket:
$0-$22,000 10%
$22,000-$89,450 12%
$89,450-$190,750 22%
$190,750-$364,200 24%
$364,200-$462,500 32%
$462,500-$693,750 35%
$693,750+ 37%


Head of Household 2023 Tax Brackets

Taxable Income
Tax Bracket:
$0-$15,700 10%
$15,700-$59,850 12%
$59,850-$95,350 22%
$95,350-$182,100 24%
$182,100-$231,250 32%
$231,250-$578,100 35%
$578,100+ 37%


Married Filing Separately 2023 Tax Brackets

Taxable Income
Marginal Tax Rate:
$0-$11,000 10%
$11,000-$44,725 12%
$44,725-$95,375 22%
$95,375-$182,100 24%
$182,100-$231,250 32%
$231,250-$346,875 35%
$346,875+ 37%


Standard Deduction Amounts

The 2023 standard deduction amounts are as follows:

  • Single or married filing separately: $13,850
  • Married filing jointly: $27,700
  • Head of household: $20,800

The additional standard deduction for people who have reached age 65 (or who are blind) is $1,500 for each married taxpayer or $1,850 for unmarried taxpayers.

IRA Contribution Limits

The contribution limit for Roth IRA and traditional IRA accounts is increased to $6,500.

The catch-up contribution limit for people age 50 or over does not get inflation adjustments and therefore is still $1,000.

401(k), 403(b), 457(b) Contribution Limits

The salary deferral limit for 401(k) and other similar plans is increased to $22,500.

The catch-up contribution limit for 401(k) and other similar plans for people age 50 and over is increased to $7,500.

The maximum possible contribution for defined contribution plans (e.g., for a self-employed person with a sufficiently high income contributing to a solo 401(k)) is increased to $66,000.

Health Savings Account Contribution Limits

For 2023, the maximum HSA contribution for somebody with self-only coverage under a high deductible health plan is $3,850. The limit for somebody with family coverage under such a plan is $7,750.

The HSA catch-up contribution limit for people age 55 and over is not inflation adjusted, so it remains at $1,000.

Capital Gains and Qualified Dividends

For 2023, long-term capital gains and qualified dividends face the following tax rates:

  • 0% tax rate if they fall below $89,250 of taxable income if married filing jointly, $59,750 if head of household, or $44,625 if filing as single or married filing separately.
  • 15% tax rate if they fall above the 0% threshold but below $553,850 if married filing jointly, $523,050 if head of household, $492,300 if single, or $276,900 if married filing separately.
  • 20% tax rate if they fall above the 15% threshold.

Alternative Minimum Tax (AMT)

The AMT exemption amount is increased to:

  • $81,300 for single people and people filing as head of household,
  • $126,500 for married people filing jointly, and
  • $63,250 for married people filing separately.

Annual Gift Tax Exclusion

For 2023 the annual exclusion for gifts will be $17,000.

Estate Tax

The estate tax exclusion is increased to $12,920,000 per decedent.

Pass-Through Business Income

With respect to the 20% deduction for qualified pass-through income, for 2023, the threshold amount at which the “specified service trade or business” phaseout and the wage (or wage+property) limitations begin to kick in will be $364,200 for married taxpayers filing jointly and $182,100 for single taxpayers, people filing as head of household, and for married people filing separately.

For More Information, See My Related Book:


Taxes Made Simple: Income Taxes Explained in 100 Pages or Less

Topics Covered in the Book:
  • The difference between deductions and credits,
  • Itemized deductions vs. the standard deduction,
  • Several money-saving deductions and credits and how to make sure you qualify for them,
  • Click here to see the full list.

A testimonial from a reader on Amazon:

"Very easy to read and is a perfect introduction for learning how to do your own taxes. Mike Piper does an excellent job of demystifying complex tax sections and he presents them in an enjoyable and easy to understand way. Highly recommended!"
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My Social Security calculator: Open Social Security