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Investing Blog Roundup: IRS Direct File to Be Made Permanent, Expanded

At the end of April, the IRS announced that their pilot program Direct File went very well by any measure. Now, they’ve announced that the program will be made permanent, and access will be expanded both in terms of available states and tax situations covered.

Without exaggeration, I think this is the best development we’ve seen in the tax world during my entire time in the industry.

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Investing Blog Roundup: 2024 Bogleheads Conference Registration Open

Quick housekeeping note: I’m on vacation for the next couple of weeks. The regular posting schedule will resume in June.

I’m excited to announce that registration for the 2024 Bogleheads Conference is now open!

In addition to all of the regulars, as well as many first time speakers I’m excited to hear from, I think it’s especially noteworthy that the lineup includes:

  • William Bengen (who did the original study that resulted in the “4% rule”),
  • Jonathan Guyton (known for his research on the “guardrails” approach to retirement spending), and
  • Karsten Jeske (who has written no fewer than 60 articles on the topic of spending from a portfolio).

I can’t wait to see a discussion between them about retirement spending.

You can find more information (and register) here:

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Investing Blog Roundup: IRS Direct File Pilot Program Results

For as long as I’ve been in the tax field (and probably longer, though I wasn’t aware of it), people have been saying that the IRS should create some easy, free way for people to file their tax returns online. And with the agency’s improved funding from the Inflation Reduction Act, the IRS has finally been working on doing exactly that.

This year the IRS ran a “Direct File” pilot program, available in just twelve states and available only to people with straightforward tax situations. Obviously that’s just a start toward what’s needed, but everything I’ve heard indicates that the program went very well. Of people who used the program and completed the survey afterward, 90% indicated that their experience with Direct File was “Excellent” or “Above Average.” And 86% said that their experience with Direct File increased their trust in the IRS.

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Investing Blog Roundup: Longevity Risk Pooling from a Mutual Fund

For several years now, it has been impossible to purchase inflation-adjusted lifetime annuities (other than by delaying Social Security). For investors taking a “safety-first” approach to retirement planning, this leaves only TIPS and I Bonds as the tools available. While TIPS and I Bonds are indeed useful tools, they don’t offer the risk pooling that lifetime annuities do (i.e., lifetime annuities stop paying income when the annuitant dies, and because of this they can provide a higher amount of income than products without risk pooling of this nature).

A new product, however, offers longevity risk pooling in a mutual fund. And these new funds also offer an inflation-adjusted option (i.e., the underlying pool of assets will be TIPS). They’re not cheap, with a 1% annual expense ratio. And because they’re mutual funds rather than insurance products, they don’t offer the same level of guarantees that lifetime annuities do. Still, it’s an interesting development to say the least. I hope we continue to see useful innovation in the area of inflation-adjusted retirement income.

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Investing Blog Roundup: Monte Carlo-Based Retirement Spending Strategies

I’ve written before about how I consider retirement spending strategies to exist on a spectrum.

  • Strategies at one end of the spectrum (e.g., the classic “4% rule” approach) do not adjust spending based on portfolio performance. This makes spending predictable, but the tradeoff is that it results in both a higher probability of portfolio depletion as well as a higher probability of having a huge unspent sum at death. In other words, by not adjusting spending based on portfolio performance, you have a greater likelihood of ultimately overspending or underspending.
  • And at the other end of the spectrum is a strategy in which you spend a given percentage of the portfolio each year. By adjusting spending based on the portfolio’s performance (e.g., the portfolio fell by 30% last year, so this year’s spending will be 30% lower than last year’s spending), you dramatically reduce the risk of underspending or overspending. But for some people, the necessary changes to spending from one year to the next simply would not be plausible.

For most people, a strategy somewhere in the middle is going to make the most sense (i.e., adjust spending somewhat over time, but don’t necessarily increase/decrease spending by a full 30% in a given year if the portfolio grew/fell by 30% in the year before).

For people who use Monte Carlo simulations as a part of their retirement planning, Derek Tharp and Justin Fitzpatrick recently shared an approach that may be of interest:

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Investing Blog Roundup: Financial “Pig Butchering” Scams

In my prior roundup article, I referenced a few different types of scams that you’re likely to encounter. In reply, multiple readers recommended the following recent episode of Last Week Tonight with John Oliver. It’s an excellent explanation of another common and clever type of scam that you and your loved ones should be aware of.

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