Boost Your Odds of Being a 401(k) Millionaire P. 31 1 %= 3 ť 1 3 2 ) = ' 3 1 VICKI ROBIN wrote the book on retiring happy. Now a whole new generation is taking her advice. The Millennial Money Whisperer RETIRE BY 40! These people are joining the movement. P. 38 FIX IT UP! High-Va lue Home R ep for Ever airs y Budget 5 Ways to Invest If You’re Worried About a Crash 8 Costco Products Obsessives Swear By 3 Bedrooms 2 Bathrooms 1 Spacious living room where your daughter can soar like an eagle. An eagle that wears footed pajamas and snorts when tickled. Everything you need to buy, sell or rent, with ease. | Find your way home.® 1 %= 3 : 3 0 9 1 ) 2 9 1 & ) 6 F E AT U R E S *M\-X9T High-value home renovations for any budget—from under $1,000 to $20,000 and up. BY S H A I N A M I S H K I N 4EKIc %RSTIRTPERHIWMKRGERLIPT]SYV LSQIETTIEPXSTSXIRXMEPFY]IVW 1SVIVIQSHIPMRKMHIEWWXEVXSRTEKIc ' 3 : ) 6 7 83 6= GAP INTERIORS 8LI1MPPIRRMEP 1SRI] ;LMWTIVIV Vicki Robin wrote the book on retiring happy. Now a whole new generation is taking her advice. B Y E L I Z A B E T H O ’ B R I E N 4EKIc 8LI%ZIVEKI-RGSQI MR)ZIV]7XEXIŜERH ;LEX-XŞW6IEPP];SVXL Salary isn’t everything. See how local costs can boost (or cut) your family’s income. BY K AITLIN MULHERE 4EKIc M AY 2 0 1 8 M O N E Y. C O M How’s Your Money Doing? Use our FREE personal finance tools to see if you’ve saved enough for retirement View all your accounts in one place See if your retirement savings are enough Use our Retirement Planner to look at different scenarios On your easy-to-read Personal Financial Dashboard Understand where your money’s going Know how your investments measure up Compare against a target portfolio And where it comes from with our Cash Flow Analyzer Make sure hidden fees don’t eat up your profits Use our FREE tools with no obligation ever Understand your investment fees with our Fee Analyzer If you decide you want financial advice, we can help with that too USED BY OVER 1.6 MILLION PEOPLE TO TRACK $500 BILLION BONUS OFFER AVAILABLE ON ALL DEVICES “6 Smart Strategies for a Comfortable Retirement” GO TO: personalcapital.com/MY58 © 2018 PERSONAL CAPITAL CORPORATION. ALL RIGHTS RESERVED. IN THIS ISSUE -RQSRI]EWMR WOEXMRK%HEQ 6MTTSRWE]W]SY RIIHXSƙRHE KSSHGSEGL 1SVISRTEKI Editor’s Note Letters & Comments The MONEY 50/50 0-:) )MKLX'SWXGS-XIQW 8LEX3FWIWWMZIW%HSVI -2:)78 Add them to your own list. 7QSSXLXLI 1EVOIXŞW&YQT]6MHI ,S[8LIWI 1MPPIRRMEP1MPPMSREMVIW +SX7S6MGL These five investments can act like shock absorbers in a diversified portfolio. There’s plenty of opportunity out there, entrepreneurs say— if you put in the hustle. 7XSGO<6E] ;EPQEVX ;36/ The mega-retailer just hit an online speed bump. 8LI7MQTPI7IGVIX XS7XE]MRK4EWWMSREXI EX;SVO 6)8-6) A study of 5,000 people reveals the way happiness and job satisfaction are connected. &SSWX=SYV 3HHWSJ&IGSQMRK EO1MPPMSREMVI 8LI'SQQSR 8LVIEH%QSRK *EWX6MWMRK')3W A seven-figure stash is within your grasp—if you invest like a cheapskate. Want to get ahead at work? Recent research suggests this characteristic is key. ,S[XS1EWXIVXLI ;SVO0YRGL Dining with colleagues doesn’t need to be a drag. Cover photograph by IAN ALLEN '309127 8LI&IWX;E] XS+YEVERXII1SVI 1SRI]MR6IXMVIQIRX THE INTELLIGENT INVESTOR THE MONEY TALK WITH... 8LMW-WXLI3RI 1EVOIX-RHMGEXSV XS;EXGL2S[ %HEQ6MTTSR It has predicted every recession since 1960. And it’s flashing a warning. BY PAU L J . L I M The Olympic skater’s investment strategy? Wine from Target and a big bet on his own career. BY W I L L L I N E N D O L L This one resource could be the key to lifetime income. *MRHXLI6MKLX 7SGMEP7IGYVMX]%HZMGI Steer clear of mistakes in claiming, which could cost you tens of thousands of dollars. MONEY (ISSN 0149-4953) is published monthly (except combined issues in January/February and June/July) by Time Inc., a wholly owned subsidiary of Meredith Corporation. PRINCIPAL OFFICE: 225 Liberty Street, New York, N.Y. 10281-1008. Periodicals postage paid at New York, N.Y. and additional mailing offices. POSTMASTER: Send all UAA to CFS. (See DMM 507.1.5.2). 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SUBSCRIBERS: If the Postal Service alerts us that your magazine is undeliverable, we have no further obligation unless we receive a corrected address within two years. Your bank may provide updates to the card information we have on ﬁle. You may opt out of this service at any time. CUSTOMER SERVICE AND SUBSCRIPTIONS: For 24/7 service, go to MONEY.COM/CUSTOMERSERVICE. You can also call 800-633-9970; write MONEY, P.O. Box 62120, Tampa, FL, 33662-2120; or email firstname.lastname@example.org. MAILING LIST: We make a portion of our mailing list available to reputable ﬁrms. If you would prefer that we not include your name, please call or write us. PRINTED IN THE U.S. PHOTOGRAPH BY ALEXANDRA SCIMECCA M AY 2 0 1 8 M O N E Y. C O M )(-836Ş7 238) EDITOR-IN-CHIEF Adam Auriemma DEPUTY EDITORS Rachel F. Elson, Paul J. Lim MANAGING EDITOR Tari Ayala SENIOR EDITORS Mike Ayers, Ian Salisbury AUDIENCE ENGAGEMENT EDITOR Matt Bemer SENIOR WRITERS Elizabeth O’Brien, Brad Tuttle WRITERS Kristen Bahler, Jennifer Calfas, Julia Glum, Alix Langone, Megan Leonhardt, Shaina Mishkin, Kaitlin Mulhere, Kerri Anne Renzulli 8LMW-WWYI-W SR*-6) UNTIL A COUPLE of months ago, I had never heard of Vicki Robin. But I certainly knew her work. The movement that sprang, in part, from her 1992 bestseller, Your Money or Your Life, is hard to avoid if you’re a money journalist. Its followers tend to overshare. They thrive in online communities such as Reddit, where they share tips and tricks on how to live rich lives while spending as little as possible. Adherents call the movement FIRE, which stands for “financial independence, retire early.” And they’re not afraid to give detailed accounts of their income, expenses, and investments. Take Grant Sabatier, a 32-year-old self-made millionaire featured on page 14. He says Robin’s book changed his life. “The mindset shift was immediate,” he tells writer Paul Schrodt. He’s not the only one. As Elizabeth O’Brien writes in this month’s cover story (page 38), Robin’s decades-old book has taken on a new life, inspiring a generation of people to get smarter about their money—to make a life rather than a living. Even if you don’t go to the extreme lengths that some FIRE walkers do—like Lily He, who scrimps on food and takes the bus so she and her husband can pour $150,000 a year into savings—there are lessons to take away. Also in this issue, you’ll find “Fix It Up!” (page 50), our guide to high-value and luxurious home improvements. Personally, I dream of the indoor pool, but the projector suits my budget a bit better. Thanks for reading. Keep in touch! DIGITAL PRODUCER Allana Akhtar AUDIENCE ENGAGEMENT PRODUCER Masiel Torres COPY EDITORS Maria Carmicino, Lauren Goldstein EXECUTIVE CREATIVE DIRECTOR Paul Martinez DIRECTOR OF PHOTOGRAPHY Mia Diehl LEAD ART DIRECTOR Peter Herbert ART DIRECTOR Josue Evilla SENIOR GRAPHIC DESIGNER Julia Bohan CONTRIBUTING DESIGNER Namita PHOTO DEPARTMENT Kacy Burdette, Sarina Finkelstein, Armin Harris, Alexandra Scimecca, Michele Taylor, Hildegarde P. Vilmenay (OFFICE MANAGER) SENIOR VIDEO PRODUCER Kate Santichen VIDEO PRODUCER Katie Meyer ASSOCIATE VIDEO PRODUCER Claire Nolan PRODUCTION ASSISTANT Will Linendoll CONTRIBUTORS Ryan Derousseau, Morten T. Hansen, Paul Schrodt, Walter Updegrave, Martha C. White MEREDITH NATIONAL MEDIA GROUP Jon Werther PRESIDENT MEREDITH MAGAZINES PRESIDENT Doug Olson PRESIDENT OF MEREDITH DIGITAL Stan Pavlovsky PRESIDENT OF CONSUMER PRODUCTS Tom WitschI CHIEF REVENUE OFFICER Michael Brownstein CHIEF MARKETING AND DATA OFFICER Alysia Borsa MARKETING AND INTEGRATED COMMUNICATIONS Nancy Weber EXECUTIVE VICE PRESIDENT OF SALES Brad Elders CHIEF CONTENT OFFICER Alan Murray DIGITAL DIRECTOR, NEWS GROUP Edward Felsenthal EDITORIAL OPERATIONS AND FINANCE DIRECTOR George Kimmerling MEREDITH CORPORATION PRESIDENT AND CHIEF EXECUTIVE OFFICER Tom Harty CHIEF FINANCIAL OFFICER Joseph Ceryanec CHIEF DEVELOPMENT OFFICER John Zieser PRESIDENT, MEREDITH LOCAL MEDIA GROUP Paul Karpowicz EXECUTIVE CHAIRMAN Stephen M. 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AARP and its affiliates are not insurers. Paid endorsement. The Hartford pays royalty fees to AARP for the use of its intellectual property. These fees are used for the general purposes of AARP. AARP membership is required for Program eligibility in most states. The AARP Automobile Insurance Program from The Hartford is underwritten by Hartford Fire Insurance Company and its affiliates, One Hartford Plaza, Hartford, CT 06155. In California, the Program is underwritten by Hartford Underwriters Insurance Company. In Washington, the Program is underwritten by Hartford Casualty Insurance Company. In Michigan, the Program is underwritten by Trumbull Insurance Company. In Minnesota, the Program is underwritten by Sentinel Insurance Company. In Pennsylvania, the Program is underwritten by Trumbull Insurance Company. The Program is currently unavailable in Massachusetts, Canada and U.S. Territories or possessions. Speciﬁc features, credits and discounts may vary and may not be available in all states in accordance with state ﬁlings and applicable law. Applicants are individually underwritten and some may not qualify. In Texas, the Program is underwritten by Southern County Mutual Insurance Company through Hartford Fire General Agency. Hartford Fire Insurance Company and its affiliates are not ﬁnancially responsible for insurance products underwritten and issued by Southern County Mutual Insurance Company. 1 005273 0)88)67 '311)287 %WEHIZIPSTIV for the past 16 years, I thought “These Women Have the Hottest Job in America” [April] was misleading. Nowadays, most software developers do not work from 5 a.m. to midnight, and I have rarely worked over 40 hours a week. The industry has been moving toward saner hours and a better work/life balance, not away from it. N I C H O L A S Z A K A S , Mountain View, Calif. ;SVO ;SVO 8LIWI ;SQIR ,EZI XLI ,SXXIWX .SF MR %QIVMGE THE POSITIVES OF PREPACKAGED TOURS Though I agree with Anthony Bourdain’s point that prepackaged tours sometimes pack too many destinations into too short a time, I see their overall value [“Anthony Bourdain’s Guide to Great Travel,” April]. Traveling with a company sometimes lets you skip the general admission line, and its guides often know which restaurants serve quality food at the best price. ALEXANDRIA’S ROLE IN U.S. HISTORY bragging rights, 2018 is clearly the Year of the Software Developer. Quick question: What’s a software developer? “It’s really just an amazing opportunity to build something,” says Pooja Gada, 30, the tech lead at hospital operations platform Qventus, based in Los Altos, Calif. “You turn ideas into something you can practice and play around with.” Developers (sometimes called programmers or coders) are behind all the applications that make our digitized world run. They create the mobile apps we interact with every day: “Frontend developers” make the buttons on our screens, “back-end developers” sort through the data we punch into them, and “fullstack developers” do both. They’re responsible for the interactivity of every “smart” device, from the Amazon Echo to those crazy Internet-connected refrigerators that keep stock of ingredients, create shopping lists, and feed you news. Developers help companies across industries bring their sales, shipping, and inventory solutions into the 21st century. And they do a million other things too. It’s an increasingly popular and important role in the tech space and will most likely continue to be for years to come. In 2016 the Bureau of Labor Statistics projected employment for the role would grow 24% by 2026—which is P H OT O G R A P H B Y H E L E N A P R I C E M O N E Y. C O M ELLEN PICKMAN I enjoyed your piece [“Best in Travel: U.S. Destinations,” April], but I’d like to point out some other historic sites: the Stabler-Leadbeater Apothecary, which Martha Washington used to go to, and the Carlyle House’s grand dining room, where British General Braddock first discussed taxation without representation. PATTY SHEETZ APRIL 2018 Alexandria, Va. OUR FAVORITE COMMENT As someone aiming to retire early, “Second Acts! How to Land a Dream Job … in Retirement” [April] was an inspiration to me. It was wonderful to read stories from retirees pursuing their passions. Thank you! DA R A S C H L EG E , Coopersburg, Pa. M O N E Y. C O M M AY 2 0 1 8 COMMENTS ABOUT RECENT STORIES ON MONEY.COM Fort Collins, Colo. RICHARD HILBERT BY K R I ST E N BA H L E R I wish there were more discussion of flight-crew training and experience [“Best in Travel,” April], as these are more important to me than which amenities are provided in the cabin. Westfield, Mass. Long hours, constant learning—and big pay. Inside the life of a software developer. SOFTWARE DEVELOPERS got a hearty slap on the back at the beginning of the year when U.S. News & World Report named the tech role the “best job” of 2018. Not that they needed the ego boost. Last year, PayScale and CNNMoney put software developers at the top of their own “best jobs in America” list. LinkedIn’s “skills companies need most in 2018” is stufed with tools that any budding developer would desire, and the job site’s recent spread on the “most popular entry-level jobs” gave software engineers, an in-demand role that crosses into the software development world, the No. 1 spot. In the battle for workplace BEST CABIN CREW? Re: “All the Things You’re Doing Wrong When You Travel, According to Anthony Bourdain” “Good article. I like doing both: seeing the hotspots as well as experiencing local culture.” Re: “What’s your No. 1 tip for anyone planning a trip?” “Bring a map as a backup. Don’t only rely on technology.” Re: “This CEO Makes 900 Times More Than His Typical Employee” “Yes, and the 900 below him don’t have the skill it takes to do that job. Same reason LeBron James makes $30 million a year, and I don’t.” Corrections & Clarifications [APRIL] Our “Best in Travel” guide misstated the overall rankings of international airline winners Qantas and Copa; they are 14 and 26, respectively, not 15 and 28. Our list of top U.S. destinations featured an out-ofdate photo of Oklahoma City. Write to MONEY: firstname.lastname@example.org Guidance starts with hearing you out. TD Ameritrade’s Financial Consultants take the time to understand what matters to you and why, before discussing investment strategies. To help you find the plan that works for you, we want to get to know you first. Schedule a complimentary goal planning session today and get up to $600 when you open and fund an account. Call (800) 870-9668 or visit tdameritrade.com/goalplanning to learn more. solicitation in any jurisdiction where we are not authorized to do business. TD Ameritrade, Inc., member FINRA/SIPC. © 2017 TD Ameritrade. 0MZI 'SWXGS 4VSHYGXW 8LEX 3FWIWWMZIW 7[IEV&] Cult favorites, from syrup to sockeye. BY PAU L S C H R O DT loyalists love the discount store for its convenience and remarkable savings. A membership enables you to buy pantry staples in bulk for a fraction of the cost by volume that you’d spend in a normal grocery. Costco has also developed a following for its own Kirkland Signature brand, particularly for food and drink. Costco works with manufacturers to develop its Kirkland products, which are sometimes reviewed just as highly as premium name-brand rivals. These are the oferings most worth their price tag, based on Amazon customer reviews and research by consumer experts. (Note: Prices may difer depending on the store.) COSTCO WHOLESALE M O N E Y. C O M M AY 2 0 1 8 36+%2-'1%40) 7=694 ;-0(%0%7/%2 73'/)=)7%0132 $18.59 for two liters $12.99 for 33.8-ounce jug $3.89 per six-ounce can A UC–Davis study found that many imported “extra virgin” olive oils failed to meet the standard for that designation. Costco’s own Kirkland olive oil, however, passed—and at a price well below that of competitors. Maple syrup is a commodity. No wonder Consumer Reports recently found that more expensive brands don’t necessarily outperform. Kirkland, the cheapest dark syrup the organization tested, did better than the priciest option. Kirkland’s canned wild salmon gets high marks from customers, including those who shop for it on Amazon. The fish comes already cooked and doesn’t require refrigeration until opening, so it’s easy to store until you crave it. P R O D U C TS : C O U R T E S Y O F C O S TC O 'SWXGSŞW/MVOPERH7MKREXYVIPEFIPETTIEVWSREFSYX SJTVSHYGXWSR'SWXGSWLIPZIW 36+%2-')<86% :-6+-230-:)3-0 MAY 2 0 1 8 &%'32 B A C O N : P E R C H I M A G E S /G E T T Y I M A G E S $15 for 64 ounces Consumer Reports testers found Kirkland bacon ranked above every other national brand, crisping up nicely and delivering a balance of meaty and fatty, as well as sweet and smoky. Sure, four pounds is a lot in one package, but it freezes well. 36+%2-'0%6+) &63;2)++7 4%61-+-%23 6)++-%23 $7.39 for 24 $12.50 per pound You don’t get much more versatile than eggs, a staple for the humblest and most sophisticated chefs. While many food labels are just marketing talk, the eggs’ humane and organic certiﬁcations mean they meet strict criteria. PHOTOGRAPH BY SPENCER LOWELL Fresh Parmigiano Reggiano—not the already grated stuf—enriches any dish, from pastas to omelets to pizza. Costco’s version comes straight from Italy and costs about half of what you’d shell out at upscale Whole Foods. :3(/% $29.99 for 1.75 liters 36+%2-'4)%298 &988)6 $11.99 (two 28-ounce jars) The prices of top-shelf vodkas can be puzzling, given the spirit tastes like … nothing in particular. Kirkland’s version has bested the ultrasmooth Grey Goose in blind taste tests, while a 1.75-liter bottle costs about half as much. M AY 2 0 1 8 While Jif has its place, Kirkland’s peanut butter ofers a more strippeddown and healthful snack for nutritionconscious eaters. There’s no added sugar, just a sprinkling of sea salt. Supersize containers are great for kids. M O N E Y. C O M +VERX7EFEXMIV QEHIcQMPPMSR MRƙZI]IEVW FYXXLIVI[IVI WEGVMƙGIWEPSRK XLI[E] ŝ-ŞQE1MPPIRRMEP 1MPPMSREMVI,IVIŞW ,S[-+SX7S6MGLŞ The digital economy provides plenty of opportunity for young entrepreneurs—if they put in the hustle. BY PAU L S C H R O DT M O N E Y. C O M M AY 2 0 1 8 For Grant Sabatier, founder of the Millennial Money blog, the “aha moment” came with his first freelance project. “I was working full-time at a digital marketing agency and had only been there about three months when I sold my first side-hustle gig,” Sabatier, 32, says. “The project was building a website for a small law firm in Chicago for $500. I was so pumped to sign my own client, but really realized I was onto something when I sold a $50,000 website to a much larger law firm about 60 days later.” From that point on, Sabatier devoted himself “150%” to his business, eventually accumulating over $1 million in five years. For others the road is obvious from the start. Taso Du Val, the cofounder and CEO of the freelance talent network Toptal— which counts J.P. Morgan and Airbnb among its clients—had a C O U R T E S Y O F G R A N T S A B AT I E R BECOMING A MILLIONAIRE by your thirties isn’t easy, unless you happen to come from a lot of money. Tips abound on how to accumulate wealth by saving and investing, but unless you’re putting away a lot of cash, a seven-figure net worth at such a young age can seem like a pipe dream. But it is attainable if you’re resourceful, driven, and, of course, lucky. While millennials have gotten a bad reputation for their sense of entitlement, many in their cohort have proved exactly how flexible, creative, and ultimately successful they can be in the business world. In some cases, they’re redefining what success looks like, all while pulling in massive incomes. We talked to two millennials who have achieved millionaire status about what it took to get there—and the wisdom they have to share. FIND THE IDEAL “SIDE HUSTLE” MAKING YOUR MARK clear vision for his company. He felt secure in his idea when Toptal signed its ﬁrst deal. “The ability to scale it, for me, was clear,” Du Val, 32, says. WANT IT MORE THAN ANYTHING ELSE “You have to really want it. A lot of people say they want it, but they don’t really,” Sabatier says of the efort required in becoming a millionaire. “You have to cancel your Netﬂix subscription and stay of Instagram and focus on building a business. You have to be willing to spend your extra time learning and pushing yourself. Read business books, listen to podcasts, or take a free online course instead of watching Netﬂix. Focus on investing in yourself and your skills. Slowly you’ll start seeing moneymaking opportunities in places you’ve never seen before.” Expect to make tradeofs. “I was working 80- to 100-hour weeks for a few years in my midto late twenties,” says Sabatier, “so I missed out on a lot of opportunities to hang out with friends and to travel as much as I wanted to.” that, so you can free up time to do everything you’ve dreamed of. MAKE MONEY BY ADDING VALUE Being young and hungry is necessary, but not enough. You also need to understand what people in a position to pay you want or need. “Money is a means to add value. You make it by adding value, and you spend it on what’s valuable to you,” Du Val says. “I understood its importance by having little of it and studying every intricate component that adds value to a business.” His ability to identify how a talent network like Toptal could serve major companies in new ways propelled his business. Toptal supplies freelance software engineers to clients with ﬂuctuating demands. “WORK TO INVEST, NOT TO SPEND” Of course, it’s not just about making money, you also need to hold on to it. C O U R T E S Y O F TO P TA L VALUE YOUR TIME. IT IS MONEY “The biggest lesson for me came from the book Your Money or Your Life, by Vicki Robin,” Sabatier says. (See our feature on Robin in this issue.) Whenever you’re working for a paycheck, he realized, you’re trading large pieces of your life for money. “This blew my mind, and the mindset shift was immediate. I started valuing my own time and tried to make as much money as possible for my time.” He believes in ﬁguring out how much you need for the life you want and aiming for 8LIOI]WE]W8STXEP')38EWS(Y:EPMW ƙKYVMRKSYXI\EGXP]LS[XSEHHZEPYIMRXLI I]IWSJTISTPI[LSGERTE]]SY 0MZI “Common wisdom is that you should save 5% to 15% of your income, depending on whom you ask. But if you can push it to 25%, 50%, or higher you can dramatically cut the number of years it takes to retire,” Sabatier says. “Sure, you have to cut back, but you should view saving as an opportunity not a sacriﬁce.” And once you’re able to save money, putting as much of it as possible in a diversiﬁed investment portfolio is the fastest route to wealth-building. “I was saving at least 60% to 80% of my income, and put literally every dollar I made on the side into investments so it could grow. I worked to invest, not to spend,” he adds. EMBRACE THE OPENNESS OF BEING A MILLENNIAL, BUT ALSO BE TOUGH Being a digital-native generation puts millennials at the forefront of the fast-changing economy—meaning there’s no lack of opportunity. “You can make money doing tons of diferent things online from anywhere in the world. That’s empowering. We are super scrappy and are ﬁguring it out,” Sabatier says of his age cohort. But Du Val has observed a certain personality quirk among his generational peers that could put them at a disadvantage in becoming self-starters who add value to the world and make a lot of money while doing so. “They seem to be easily ofended,” Du Val says of American millennials. “This is often correlated with being weak, so I would suggest improving that.” Part of developing strength, after all, is acknowledging your weaknesses. M AY 2 0 1 8 M O N E Y. C O M ;SVO 8LI7MQTPI 7IGVIXXS7XE]MRK 4EWWMSREXI EX;SVO A study of 5,000 people reveals the way happiness and job satisfaction are connected. BY M O R T E N T. H A N S E N ILLUSTRATION BY CHAD HAGEN to selecting a job or career, the usual advice is to love what you do. In fact, given all the talk about “passion” and “following your dreams,” you might believe that loving what you do is the only consideration. And yet following your passion can be dangerous. As many a failed actor in Los Angeles will tell you, doing what you love can lead to unemployment. But what’s the alternative? Ignoring your passion isn’t so great either. It leads people to plod along, doing dull, empty work to earn a paycheck. WHEN IT COMES M AY 2 0 1 8 M O N E Y. C O M ;SVO JOB SATISFACTION M O N E Y. C O M M AY 2 0 1 8 Š;,-0)4%77-32 -7ŝ(3;,%8 =3903:)Ş 496437)-7 ŝ(3;,%8 '3286-&98)7Ş š —MORTEN T. HANSEN, SCHOOL OF INFORMATION, UNIVERSITY OF CALIFORNIA AT BERKELEY Studying people like Guay, I came to understand why matching passion and purpose helps us perform so much better. It comes down to energy. Because Guay loved what she did and felt that she was serving a purpose, she charged out of bed each morning, eager to get to her hotel. Once there, she greeted guests warmly and did everything she could to make their stay memorable, even when she was tired and cold on dark January mornings in icy Quebec. Yes, she tapped into her natural talents, and yes, she worked long hours— both contributed to her success. But it was the energy she brought to her work—born from her sense of passion and purpose—that allowed her to excel. My data conﬁrmed that passion and purpose strongly predict how much efort people put in for each hour they’re on the job, rather than the sheer number of hours they work. That intensity leads in turn to higher performance. If you love what you do, you’ll show up with a certain amount of vigor. And if you also feel that you’re helping other people—that they need you and depend on your contributions—your motivation to excel becomes that much greater. You’re targeting your eforts toward making contributions to your purpose. You activate positive emotions such as joy, excitement, pride, inspiration, and hope, all of which gives you more energy. And that lets you do everything better on the job. Now, you might think that this kind of matching is possible only in certain industries, like health care, teaching, and hotel service. Not true! We found that nearly every industry or occupation boasted at least some people who reported having lots of passion and purpose. That ﬁnding has implications for many of us: Try to cultivate more passion and purpose in the place where you already are. Chances are that you will ﬁnd more ways to feel passionate and a strong sense of purpose. It will make your job more interesting, and you will also likely perform far better. Morten T. Hansen’s new book, Great at Work: How Top Performers Do Less, Work Better, and Achieve More, is out now. HANSEN: TERRY HUSEBYE Many of us bounce between following and ignoring our passion, unsure of what to do, groping for the best way forward. Is there a solution to this tradeof? Yes. My study of 5,000 employees and managers uncovered a third option, what I call “matching.” Some people not only pursue passion in navigating their careers, but they also manage to connect this passion with a clear sense of purpose on the job—they contribute, serve others, make a diference. While passion is “do what you love,” purpose is “do what contributes.” As my research shows, people who match passion with purpose in this way perform much better than their peers. Take Genevieve Guay, a concierge at a luxury hotel in Quebec City. As she told me, she goes to extreme lengths to please guests. Once she spent several days racing back and forth across town to locate objects that a particular guest needed for a photography shoot. What kind of concierge does that? A passionate one. “I love to improve the lives of others with my personal touch,” Guay said. “This job gives me a chance to meet a lot of people from everywhere around the world without having to move from my desk.” But Guay also felt a strong sense of purpose in her job: “I have direct impact. I can see directly what I gave, even with simple things like a restaurant that worked for them.” Guay’s great passion for her job served a purpose, helping and caring for hotel guests. Unlike so many of us, she found magic in her career, landing in that special place where passion and purpose overlap. $UHWLUHPHQW SURGXFWLVQRW DUHWLUHPHQW SODQ What’s your game plan? To get help with yours, visit mutualofamerica.com or call 1-866-954-4321. Mutual of America® and Mutual of America Your Retirement Company® are registered service marks of Mutual of America Life Insurance Company, a registered Broker/Dealer. 320 Park Avenue, New York, NY 10022-6839. ;SVO CORPORATE LADDER 8LI'SQQSR 8LVIEH%QSRK *EWX6MWMRK')3W Want to get ahead at work? Recent research suggests this characteristic is key. BY K R I ST E N BA H L E R M O N E Y. C O M M AY 2 0 1 8 3RPMRIQEOIYT KMERX+PSWWMIVŞW ')3)QMP];IMWW EFSZI7LI TEVPE]IHEFPSK MRXSEQYPXMQMPPMSR HSPPEVIGSQQIVGI FYWMRIWWMRNYWXE JIIEVW A M Y L O M B A R D —T H E N E W Y O R K T I M E S / R E D U X Charisma? Drive? The perfect blend of Ivy League degrees, lots of experience, and a blemish-free résumé? Hardly. According to The CEO Next Door, a new book by leadership consultants Elena Botelho and Kim Powell, the people at the top of the food chain aren’t the prodigies we think they are. Statistically, a chief executive officer is more likely to drop out of or skip college than go to an Ivy League school, they found. And the typical CEO deﬁnitely wasn’t “born to lead”—only about 30% of top executives had their eye on the C-suite at the start of their career. And it makes sense. Some of the most powerful CEOs in history sprang from humble beginnings. Henry Ford grew up on a farm. Dave Thomas, the late WHAT MAKES A GREAT CEO? CEO of Wendy’s, left high school to bus tables at a local restaurant. Tech industry CEOs like Bill Gates, Steve Jobs, and Mark Zuckerberg all dropped out of college. Glossier’s Emily Weiss turned a blog into a multimilliondollar cosmetics company and e-commerce giant. The average CEO, in fact, starts out a lot like the rest of us. “We don’t think of CEOs as ‘normal people,’ ” Botelho says. “But a lot of the aspects of becoming a CEO are … accessible to everyone.” Over the course of 10 years, Botelho and Powell surveyed more than 17,000 chief executives and took an in-depth look at the careers of 2,600 of them— a study they dubbed the “CEO Genome Project.” They took a special look at “CEO sprinters,” or fast-rising executives who reached the executive role in less than the average 24 years after their ﬁrst job. Like the larger pool of executives, these CEOs weren’t any more extroverted, or motivated, than the average joe. The common denominator, rather, was a willingness to step into the unknown. More than a third of these CEOs made a “big leap” at some point in their career, like taking on a role that tripled their leadership authority. And about 60% made a strategic decision to “go small,” by moving to a smaller company, or taking on a lower rank. This is an important distinction—it proves leadership isn’t written in the stars. And the path to the C-suite might be more likely than we think. OFFICE LIFE ;SVO 1EH1IRŞW(SR(VETIV 8:ŞWOMRKSJXLI LSYVWPSRKPYRGL QIIXMRK ,S[XS1EWXIV XLI;SVO0YRGL Daytime dining with coworkers doesn’t have to be a drag—follow these tips to feel suave and satisﬁed. C A R I N B A E R — A M C /C O U R T E S Y: E V E R E T T C O L L E C T I O N BY PAU L S C H R O DT THE PROFESSIONAL LUNCH is supposed to be a pleasant break from the office, but it can be fraught with pressure. If you’re sitting across the table from a higher-up, you may wonder, What should I order to look sophisticated? Or if you’re organizing said of-site meeting: Which restaurant will make everyone like me? It helps to remember that work lunches are supposed to be somewhat relaxed afairs. So don’t overthink them. They’re not boardroom meetings. But simple guidelines can help ensure you’re sending the appropriate message. Here’s a guide that will guarantee your experience will be stress-free. 5 RULES FOR LUNCH SUCCESS 8,)6)78%96%28 7,390(&)2-') &982388332-') Whether you’re footing the bill or it’s on the company’s tab, a business lunch should project a certain level of seriousness. Aim for a restaurant that’s on the higher end but not inaccessibly pricey or stufy, which can alienate either your reports or managers. Any place with rules about dish substitutions or a complicated menu is out. American and Italian meals are always crowd- you’re a senior member of the team assembled, it’s ﬁne to start of by ordering a beer or a glass of wine and encouraging others to do the same if they would like to. If you’re lower in the pecking order, wait to get a signal from the boss. If the lunch is a celebratory occasion, booze is all but guaranteed. And don’t order a drink for yourself that’s over $15, unless you want to be judged as cost-inefective. pleasers, but so is Asian or Mexican cuisine. Just be sure the setting and menu deliver. 8,-2/'31*368 Just as sophistication matters, so do the simpler pleasures like comfortable chairs and ample elbow room. A relaxing venue will do a lot to ease nerves and add to atmosphere. The point, after all, is to get people to open up so you can share ideas and connect, which will ultimately improve your standing in the office. +)8731)8,-2+ *368,)8%&0) The people you work with ultimately want to feel heard, and the people above you want to be ﬂattered, though not too obviously. There’s no easier way to bond at a business lunch than by asking what people like, and suggesting possible starters to share. Oysters and other items from a raw bar are luxurious, as long as people aren’t squeamish. Antipasti like salami and cheeses at an Italian joint will get everyone talking and satisﬁed during the wait for the main courses. 6)%(8,) 6331&)*36) 36()6-2+%2 %0'3,30-'(6-2/ %:3-(1)77= The days of Mad Men– style martini-soaked lunches are indeed dead. In today’s work world, getting drunk in the middle of the workday is seen as highly unprofessional, not to mention unproductive. But a round of drinks can help lubricate conversation and get spirits up. If As on a ﬁrst date, you don’t want to distract with your eating or any food liable to get stuck on your face. Unwieldy pastas like spaghetti are tasty and often afordable, but maybe not the best choice. Unless, that is, you’re feeling really comfortable with your coworkers. M AY 2 0 1 8 M O N E Y. C O M FIDELITY WEALTH MANAGEMENT With Fidelity Wealth Management, you’ll have a dedicated advisor who provides: Straightforward advice Tailored recommendations Tax-eicient investing strategies Guidance designed to grow and protect your wealth Schedule an appointment with a Fidelity advisor today. FIDELITY.COM/WEALTH | 800.FIDELITY Investing involves risk, including risk of loss. Investment minimums may apply. Fidelity Brokerage Services LLC, Member NYSE, SIPC. © 2018 FMR LLC. All rights reserved. 837004.2.0 -RZIWX ,S[XS7QSSXL XLI1EVOIXŞW &YQT]6MHI Worried about how shaky stocks have become lately? These five investments can act like shock absorbers in a diversified portfolio. FO L I O A RT BY PAU L J . L I M ILLUSTRATION BY MUTI THE WALL STREET SCARE that spooked investors in February proved to be a false alarm, showing how risky it can be to abandon stocks altogether out of fear. But it was the start of something. Though the sellof didn’t turn into a bear market, stocks have entered a new, bumpier stretch. “Volatility returned in the ﬁrst quarter of 2018 with a vengeance,” says David Kotok, chairman of Cumberland Advisors. So far this year, investors have already witnessed more days in which the S&P 500 index rose or fell by at least 1% than in all of 2017. And that type of volatility is likely to M AY 2 0 1 8 M O N E Y. C O M remain, market strategists say. For starters, at nine years old, this is the second-oldest bull market, and rallies get jittery as they age. Plus, “the market is reacting to the uncertainty around this President’s style,” Kotok says. There are also plenty of fundamental reasons investors are getting nervous, such as rising inﬂation, which could force the Federal Reserve to hike rates more aggressively than investors would like, and a trade war. Yet the bull keeps plodding along, so you have to ﬁnd a way to smooth out the bumps without slamming the brakes on stocks. 1. “STEADY EDDIE” STOCKS M O N E Y. C O M M AY 2 0 1 8 1IQTPS]IIWI\EQMRISTXMGEPƙPQMR XLIQERYJEGXYVIVŞWLMKLXIGLMRWTIGXMSR GPIERVSSQ Fewer Spills, More Thrills History says that by sticking with lowvolatility stocks that pay dividends, you won’t just smooth out the market’s bumps, you’ll also outperform. ANNUALIZED TOTAL RETURNS Low-volatility-plus-dividend strategy S&P 500 Past 3 years 14.5% 10.8% 14.9% Past 5 years Since 1990 14.2% 13.1% 10.2% NOTE: Based on the S&P 500 Low Volatility High Dividend Index. SOURCE: Standard & Poor’s S&P 500, while Waste Management shares gained value. Thanks to these types of stocks, this ETF has lost only about two-thirds as much as the market in down months over the past ﬁve years. 2. DIVIDEND-PAYING STOCKS Income-generating stocks have a built-in cushion: the dividends that they throw of. If share prices were to fall, say, 10%, a payout of 3% would alleviate some of that pain. In 2008, when the S&P 500 lost 37%, dividend payers lost just 23%. There’s another reason to favor dividends now that volatility is rising with inﬂation: “Over the long term, dividends have done a good job of staying ahead of inﬂation,” says Jack Ablin of Cresset Wealth Advisors. How to invest: If the economy slows, ﬁnancially weak ﬁrms could cut their payouts, as many banks did in the ﬁnancial crisis. So look for businesses healthy enough to COU RT ESY O F 3 M What’s the easiest way to reduce volatility in your portfolio? Stick with low-volatility stock, or shares of humdrum companies that gyrate less than the market. These Steady Eddies held up better than the S&P 500 index in the global ﬁnancial crisis. And in the 2000–2002 tech wreck, they actually gained 21%. Low-volatility stocks have also outperformed over the long run, by around two percentage points annually. How to invest: There are a number of mutual and exchangetraded funds that focus on low-volatility stocks. iShares Edge MSCI Minimum Volatility USA (USMV), for one, is a big, low-cost ETF that invests in about 200 U.S. stocks exhibiting lower-than-average volatility and strong proﬁt growth. Among its top holdings are boring names like the medical instrument maker Becton Dickinson and Waste Management. In the 2008 crash, Becton Dickinson fell only about half as much as the A SMOOTHER RIDE -RZIWX :30%8-0-8=6)8962)( -28,)*-67859%68)63* ;-8,%:)2+)%2')š —DAVID KOTOK, CHAIRMAN OF CUMBERLAND ADVISORS case today. In such periods, stocks lost value in 34 out of 105 quarters since 1970. But in those down quarters, “commodities delivered a positive total return about 75% of the time,” Paulsen found. How to invest: On our MONEY 50 list of recommended ETFs, there’s iShares North American Natural Resources ETF (IGE), which gives you exposure to energy and natural resources for the relatively cheap cost of 0.48% of assets a year. keep paying in good times and bad. A good place to ﬁnd them is in the SPDR S&P Dividend ETF (SDY), which tracks an index of companies that have increased their payouts for at least 20 straight years. Among its top holdings are AT&T and Exxon Mobil, which have both boosted payouts every year for more than three decades. 3. COMMODITIES Why dedicate a small portion of your portfolio—say, 5% to 10%—to raw materials? For starters, commodities are a natural inﬂation hedge. Plus, “commodities have cheapened signiﬁcantly” relative to stocks, says Jim Paulsen, chief investment strategist for the Leuthold Group. But the real reason is their diversiﬁcation efect. Paulsen looked at past inﬂationary times— speciﬁcally, periods when nominal GDP was growing faster than the unemployment rate, which is the 4. BARGAIN-BASEMENT STOCKS For years, stocks have been trading at lofty prices. But investors have argued that high price/earnings ratios aren’t a problem in low-inﬂationary times. With consumer prices moving higher now, that valuation argument loses some punch. This is why Lewis Altfest, president of Altfest Personal Wealth Management, says investors ought to “trim some of the high-ﬂying stocks with high P/Es” from their portfolios. How to invest: Use the equity portion of your portfolio to invest in undervalued stocks. On our MONEY 50 list, there’s the PowerShares FTSE RAFI U.S. 1000 ETF (PRF), which owns blue-chip stocks that are cheap based on fundamental factors such as earnings and dividends. The fund’s average stock sports a P/E of less than 15. That’s nearly 15% cheaper than the average valuation for the S&P 500. 5. HIGH-QUALITY STOCKS If you’re worried that stocks are gyrating on economic fears, then recession-proof your portfolio. In addition to low-volatility and lower-priced stocks, history says that high-quality stocks—or shares of dominant companies with strong balance sheets and little debt—are able to withstand stormy economic times better than the market as a whole. What’s more, high-quality companies tend to perform better in the latter stages of a bull market. How to invest: PowerShares S&P 500 Quality Portfolio ETF (SPHQ) “invests in proﬁtable ﬁrms with strong balance sheets and conservative operating asset growth,” noted Morningstar analyst Alex Bryan. These are companies like the manufacturer 3M and consumer staples giant Procter & Gamble. As a result, said Bryan, the ETF “should hold up better than most of its peers during market downturns and ofer attractive performance over a full market cycle.” Over the past ﬁve years, the ETF has outpaced U.S. stocks slightly. Yet in those months when the S&P 500 lost value, this fund fell only around three-quarters as much. M AY 2 0 1 8 M O N E Y. C O M -RZIWX THE INTELLIGENT INVESTOR 8LI3RI)GSRSQMG -RHMGEXSV8LEX 6IEPP]1EXXIVW Could the surprising decline in housing starts signal a slowdown ahead? B Y PA U L J . L I M M O N E Y. C O M M AY 2 0 1 8 8LIRYQFIV SJRI[LSQI GSRWXVYGXMSR TVSNIGXWXLEXFVSOI KVSYRHMR*IFVYEV] JIPPF]LMRXMRK EXERIGSRSQMG WPS[HS[RELIEH P H O TO G R A P H B Y L U K E S H A R R E T T— B L O O M B E R G V I A G E T T Y I M A G E S market indicators is that they can shift on a dime. Investors, for instance, may seem utterly conﬁdent about the economy one day—until the Dow plunges more than 1,000 points in a week, at which time that assuredness goes away. Yet there is one indicator with a great record at predicting the mood several months out: housing starts. “Housing starts are a terriﬁc leading indicator of the economy,” says Terri Spath, chief investment officer at Sierra Investment Management. To begin with, housing—and all the ancillary spending associated with the purchase of a home, including utilities— is a huge part of the economy, representing roughly one-sixth of total U.S. gross domestic product. And new-home construction is a unique bellwether. Since it can take months to plan, build, and sell a new THE PROBLEM WITH MOST house, homebuilders will be reluctant to break ground on a project if there’s any hint of an economic slowdown ahead. Plus, new-home construction is tied to longer-term consumer conﬁdence. “Who wants to engage in the biggest investment of their life—buying a house—if they’re worried about losing their job?” asks Sam Stovall, chief investment strategist for the research ﬁrm CFRA. That’s why before every recession since 1960, housing starts saw a signiﬁcant decline. What is this indicator signaling today? In February, housing starts tumbled unexpectedly—by 7% compared with January and 4% vs. the prior year—raising red ﬂags. It’s still too soon to panic, though. Stovall found that in the months leading up to past recessions, the typical year-overyear drop in housing starts averaged around 25%. But other data suggest there’s softness in housing that could spill over into starts later on. New-home sales fell more than expected in January, by 7.8%, while existing-home sales slumped 4.8% vs. the same period a year ago. That marked the steepest decline since August 2014, according to the National Association of Realtors. Another canary in the coal mine: Home Depot’s shares have sunk 16% since late January, twice as much as the S&P 500. Investors could view the slowdown in real estate as a sign of future headwinds for the biggest home-improvement chain. In other words, Home Depot stock could be a leading indicator of housing starts, which are a leading indicator for the market and economy. -RZIWX STOCK X-RAY <6E] ;EPQEVX After making big inroads in e-commerce, the retailer hits an online speed bump. BY RYA N D E R O U S S E AU INVESTORS HAVE COME to believe that Walmart is the one brickand-mortar store with a legitimate shot at challenging Amazon for e-tailing supremacy. Driving that narrative: Walmart’s push into “omnichannel retailing,” a strategy that lets people peruse, purchase, receive, and return goods through various channels from online to mobile apps to delivery to physical locations. This has helped the world’s largest retailer turn its costly storefronts into a competitive advantage. Walmart has more than 5,300 U.S. big-boxes from which it can facilitate grocery pickups, easy returns, and same-day deliveries. Amazon has fewer than 500 Whole Foods locations. Another plus: Walmart’s omnichannel customers spend twice as much as store-only shoppers, according to MKM Partners. But a funny thing happened to Walmart on its way to omnichannel dominance. The one channel that really matters to investors right now—online sales—suffered a surprising slowdown, casting doubt on Walmart’s long-term strategy. 1 Walmart’s online sales growth has slowed unexpectedly, raising concerns. E-COMMERCE REVENUE GROWTH 60% 50% 23% Q2 Q3 Q4 1 The retail giant reported that e-commerce sales grew 23% in the past quarter. Relative to the retailer’s overall revenue growth of 4%, that seems pretty good. But rival Amazon enjoyed 38% revenue growth in the most recent period. And compared with Walmart’s 50%-plus growth rate in several prior quarters, it was downright disappointing. “It is diicult to ignore the magnitude of the slowdown,” RBC analyst Scot Ciccarelli said. Plus, to maintain its growth, Walmart has had to lower prices, cutting into profit margins. Walmart oicials project that online sales will accelerate and grow 40% this year. But at what cost? Already, current growth “is coming at the expense of margins,” said Morningstar analyst John Brick, as the retailer lowers prices and invests in new technologies to keep up with Amazon. Going forward, “it will be hard to raise margins in a world where Amazon seems obsessed with lowering prices to gain market share,” noted Argus analyst Christopher Graja. GROSS PROFIT MARGIN 25.5% 25.0 24.5 24.0 Q2 ’17 Q3 ’17 Q4 ’17 Q1 ’18 Q2 ’18 Q3 ’18 Q4 1 ’18 And Walmart has a long way to go to compete with Amazon’s online dominance. SHARE OF TOTAL E-COMMERCE SALES, DECEMBER 2017 4% 44% Amazon Walmart Walmart’s 2018 fiscal year began Feb. 1, 2017, and ended Jan. 31, 2018. SOURCES: Walmart, eMarketer There are signs of hope. The percentage of customers with annual incomes above $100,000 visiting Walmart’s website has gone from 30% in 2016 to 35%, according to Credit Suisse. And the categories Walmart excels at—food, drink, and personal care—have ample room to grow online. But Amazon and Target have younger, wealthier customer bases, and both are making a push into the same spaces Walmart wants to own online. M O N E Y. C O M Now is not the time to roll over, it’s time to adopt change. Every day, more than 4,100 dogs and cats are killed in shelters across the country — but with Best Friends Animal Society leading the charge, and your help, we can Save Them All. save-them-all.org V E C T O R I L L U ST R AT I O N B Y M AY ST R A — G E T T Y I M A G E S ; N E ST E G G B Y N I C K B L U T H — N O U N P R O J E C T 6IXMVI -QTVSZI=SYV 3HHWSJ&IMRK EO 1MPPMSREMVI A seven-figure nest egg is within grasp—if you invest like a cheapskate. BY E L I Z A B E T H O’ B R I E N A N D WA LT E R U P D EG R AV E over the past few years have helped create a record number of 401(k) millionaires, according to Fidelity, the country’s largest administrator of workplace retirement plans. Some 150,000 of Fidelity’s savers had seven-figure 401(k) accounts as of the end of last year, up from 93,000 a year earlier. While these supersavers represent just 1% of the company’s 15.3 million retirement plan participants, they show a positive trajectory. Now, if you’re worried that this trend could reverse course should the bull market slow down, Fidelity raises this important point: This new group of millionaires wasn’t born out of stock market gains alone. Retirement accounts were also buoyed by contribution rates that rose to 8.6% at the end of 2017, up from 8.4% a year ago. “2017 was a good year for retirement savers—not only because of the stock STRONG STOCK MARKET RETURNS M AY 2 0 1 8 M O N E Y. C O M 6IXMVI WHO WANTS TO BE A MILLIONAIRE? market’s performance but because many investors took positive steps toward managing their retirement savings, such as increasing their contribution rate,” noted Kevin Barry, Fidelity’s president of workplace investing. THE OTHER SECRET TO 401(K) SUCCESS Besides maintaining a high savings rate and having the discipline to stay invested in a diversiﬁed mix of stocks, bonds, and cash, what else can you do to boost your chances of amassing wealth? One easy strategy is to ﬁgure out how much you’re losing to fees in your retirement accounts—and then to do something about that. A recent TD Ameritrade survey of 1,000 investors found that only 27% knew how much they were paying in their 401(k)s. Worse still, nearly 60% either didn’t know if their plan levied fees or mistakenly believed they weren’t being charged anything. Given the recent turmoil in the market—with the S&P 500 index of U.S. stocks slipping into an official correction (a loss of at least 10%) in February—investment expenses may be the last thing on your mind. But over the long run, the amount you pay in fees can play a surprisingly big role in determining the eventual size of your nest egg. HOW FEES DIMINISH YOUR CHANCES OF SUCCESS Investment fees come straight out of your account, efectively reducing your net returns. But when you’re investing over the course of many years—as is the case with retirement savings—the impact goes well beyond the amount you pay for the fees themselves. To illustrate how and why, consider two investors, each with a 401(k) balance of $100,000 earning 6% a year before fees. But let’s assume one loses 1% of assets a year to fees, while the other pays just 0.25%. At ﬁrst glance, that diference may not seem like much. In the ﬁrst year, the higher-cost account pays 1%, or $1,000, which reduces net returns to 5%, leaving HOW AMERICANS INVEST IN 401(K)S— BY THE NUMBERS $104,000 Average account balance among participants 71% Average account’s exposure to equities $5.3 TRILLION Total amount held in all 401(k) accounts 8.6% Average savings rate among participants SOURCES: Vanguard, Fidelity, ICI 1%2=-2:)78367833/437-8-:) 78)47 Ŧ 79', %7 -2'6)%7-2+ 8,)-6'3286-&98-326%8)š —KEVIN BARRY, PRESIDENT OF WORKPLACE INVESTING AT FIDELITY INVESTMENTS M O N E Y. C O M M AY 2 0 1 8 it with an end-of-year balance of $105,000. Expenses for the lower-cost account, meanwhile, are $250 in year one, resulting in a net return of 5.75% and a balance of $105,750. Clearly, the lower-cost account has earned a higher return, but the diference isn’t earth-shattering. Over time, however, the gap grows substantially. It’s not just because of the drag of the fees themselves, even though they do get larger each year as the accounts grow. There’s also the “opportunity cost” associated with higher fees—or the gains you miss out on because money that went to loftier expenses is no longer invested in your account. Going back to the example above, $100,000 in the higher-cost account would grow to about $163,000 in 10 years, which is $12,000 less than the balance of the lower-fee account. Roughly 80% of that $12,000 diference is due to the higher-cost account paying $9,300 more in fees over the course of 10 years. But 20% of the gap is owing to gains lost, since $9,300 went to expenses and was not allowed to compound in the account. After 20 years, the higher-cost account falls further behind—by about $41,000, since it has shelled out $24,000 more in fees. But the portion of that gap attributable to lost investment gains is nearly $17,000, accounting for 40% of the diference. And over 30 years—which is the course of a career investing in a 401(k)—the diference swells even more, with the higher-cost account’s balance now trailing its cheaper counterpart’s by about $103,000. FEES MATTER MORE OVER TIME Notice the pattern here? By avoiding high fees, more of your money remains in your account, allowing that extra dough to compound in value and boost your account balance over the years. Fortunately, there’s a simple way to avoid having your nest egg sandbagged by high expenses— invest in funds with modest annual costs. That’s pretty easy to do these days, given the proliferation of low-cost index funds, ETFs, and even reasonably priced actively managed funds. Granted, in a 401(k) or similar workplace retirement plan, your choice of low-cost options could be limited. Still, you want to hold down costs the best you can. You can compare fees on the investment options in your 401(k)—and get info on administrative and other plan fees—by checking out the annual disclosure the Department of Labor requires plan sponsors to provide for plan participants. Many companies also provide fee information on their 401(k) website. C O U R T E S Y O F J C O N N E L LY WHAT ELSE COUNTS? As important as holding the line on expenses is, you don’t want to overlook other crucial elements of planning for retirement. For example, you want to be sure you’re creating a portfolio of investments that’s truly diversiﬁed, that jibes with your tolerance for risk, and that’s tax-efficient. And you can’t lose sight of the fact that no matter how good—and cost-conscious—an investor you are, how much you save is still likely to be the single biggest determinant of your success. ;LEX'ER=SY(S-J=SYŞVI7XYGO MRE0SYW]O# -JGYXXMRKGSWXWGERFSSWX]SYVGLERGIWSJFIGSQMRKEOQMPPMSREMVI [LEXLETTIRWMJ]SYŞVIWXYGOMRELMKLJIITPER#132)=EWOIHVIXMVI QIRXI\TIVX.SWL6SFFMRWJSVEHZMGISRLS[XSPSFF]]SYVIQTPS]IV can be framed as a really cool, positive thing instead of trying to hold the business owner over a barrel.” .SWL6SFFMRWMWGLMIJ WXVEXIK]SJƙGIVSJ %QIVMGEŞW&IWXO You might assume there’s not a lot you can do if you’re in a lousy 401(k), especially if you work for a small business. Small 401(k) plans are often handled by the owner, and you may not feel comfortable complaining to the boss. But Josh Robbins, whose ﬁrm designs, administers, and provides record-keeping for workplace retirement plans, says you may have more sway than you think: ACCENTUATE THE POSITIVE. Lobbying your boss to improve your 401(k) need not be antagonistic. “Typically the person with the highest balance in your plan is the owner,” Robbins says. “I think it PITCH IT AS A COSTCUTTING MOVE, NOT AN EMPLOYEE BENEFIT. Robbins notes that his ﬁrm worked with a company in which the owner routinely tasked employees to come up with creative costcutting ideas. If your employer does the same, “this might be another interesting way to frame it: You bring this as your cost-cutting idea for the company,” says Robbins, adding that lower 401(k) fees could save the plan and its investors millions. AT THE VERY LEAST, ASK FOR INDEX FUNDS. If you run into diiculties persuading your company to change 401(k) providers to lower costs, you should at least ask to get access to a few more low-cost index funds as investment choices in your plan. The key term in that sentence is “low-cost.” Robbins warns that M AY 2 0 1 8 even if index funds are added to a suite of investment options, some plans mark up management fees on those products. So stress that you want low-cost index funds. BE WILLING TO USE OTHER TOOLS. A 401(k) is a great savings tool, but only if the fees are reasonable. And it’s not the sole retirement account around. How high is too high when it comes to fees? “If your all-in plan fees are north of 2%, you’re in what I would call the realm of egregious,” Robbins says. Now, if you have a really generous match on that high-fee plan, it’s worth taking advantage of the match and then taking your remaining contributions and using a Roth IRA instead. But “if there’s not a match, it’s a nobrainer,” he says. You’re better off going to a low-cost IRA provider and investing in really low-cost index funds than maxing out on a high-cost 401(k) with expensive investment options, he says. M O N E Y. C O M Picture those perfect days at the beach. But without your youth. Or your hair. LIVE LIKE A 20 YEAR OLD. INVEST LIKE A 50 YEAR OLD. There was a time to live your youth. Now may be the time to invest for your retirement. The Main Advantages of Municipal Bonds Investors are attracted to municipal bonds for three reasons; safety of principal, regular predictable income and the tax-free benefits. Together, these three elements can make a compelling case for including tax-free municipal bonds in your portfolio. Potential Safety of Principal When investing in municipal bonds, investors are paid back the full face value of their investment at maturity or earlier if called, unless the bond defaults. This is important because many investors, particularly those nearing retirement or in retirement, are concerned about protecting their principal. In May of 2016, Moody’s published research that showed that rated investment grade municipal bonds had an average cumulative 10-year default rate of just 0.09% between 1970 and 2015.* That means while there is some risk of principal loss, investing in rated investment-grade municipal bonds can be an important part of your portfolio. and, depending on where you live, may also be exempt from state and local taxes. Tax-free can be a big attraction for many investors. Potential Regular Predictable Income Municipal bonds typically pay interest every six months unless they get called or default. That means that you can count on a regular, predictable income stream. Because most bonds have call options, which means you get your principal back before the maturity date, subsequent municipal bonds you purchase can earn more or less interest than the called bond. According to Moody’s 2016 research,* default rates are historically low for the rated investment-grade bonds favored by Hennion & Walsh. About Hennion & Walsh Since 1990 Hennion & Walsh has specialized in investment-grade tax-free municipal bonds.The company supervises over $3 billion in assets in over 16,000 accounts, providing individual investors with institutional quality service and personal attention. Our FREE Gift To You We’re sure you’ll want to know more about the benefits of tax-free Municipal Bonds. So our specialists have written a helpful Bond Guide for investors. It’s free and comes with no obligation whatsoever. Potential Tax-Free Income Income from municipal bonds is not subject to federal income tax FREE Bond Guide Without cost or obligation Call (800) 316-1837 © 2018 Hennion & Walsh, Inc. Securities offered through Hennion & Walsh Inc. Member of FINRA, SIPC. Investing in bonds involves risk including possible loss of principal. Income may be subject to state, local or federal alternative minimum tax. When interest rates rise, bond prices fall, and when interest rates fall, bond prices rise. *Source: Moody’s Investor Service, May 31, 2016 “US Municipal Bond Defaults and Recoveries, 1970–2015. Past performance is not a guarantee of future results. SOCIAL SECURITY 6IXMVI fancy financial products to stretch your retirement savings. In fact, most Americans have access to the best retirement income generator around: Social Security, according to a study by researchers at the Stanford Center on Longevity. In collaboration with the Society of Actuaries, these researchers recently analyzed 292 retirement income strategies, looking for optimal ways middleincome workers—Americans with $100,000 to $1 million in savings who don’t have significant help from financial advisers—can fund living expenses in retirement. Their conclusion: Social Security, if tapped strategically in concert with other sources of income—such as your 401(k)s, individual retirement accounts, and home equity—will meet most of your planning goals. This may come as a surprise, since a recent Gallup poll showed that nearly two-thirds of Americans assume Social Security will be either “a minor source” of their retirement income or “not a source at all.” Yet the researchers point out that “for most middle-income retirees, Social Security is the foundation of retirement income, providing anywhere from half to more than three-fourths of total retirement income.” P H OTO G R A P H BY ST E V E M A S O N — G E T T Y I M AG E S YOU DON’T NEED 8LI&IWX;E] XS+YEVERXII 1SVI1SRI] MR6IXMVIQIRX The one resource Americans have little faith in—Social Security—could be the key to securing lifetime income, research shows. BY E L I Z A B E T H O’ B R I E N MAXIMIZE YOUR SAFETY NET The study’s authors created a retirement income strategy around Social Security that they call “Spend Safely in Retirement.” Their approach tries to wring out the most from your existing savings, while maximizing Social Security’s M AY 2 0 1 8 M O N E Y. C O M 6IXMVI SOCIAL SECURITY guaranteed income, writes Steve Vernon, research scholar at the Stanford Center on Longevity and lead author of the study. This strategy also protects against inﬂation and the risk of outliving savings and is designed to minimize taxes and complexity. STEP 1: DELAY CLAIMING BENEFITS In order to maximize how much you collect, you should delay tapping Social Security until you turn 70, the report concludes. Financial advisers have long urged clients to wait as long as possible to begin receiving Social Security beneﬁts, as claiming earlier than your full retirement age reduces the potential size of your monthly check by about 30%. Another way to think about it: Every year you hold of claiming beneﬁts from age 62 to 70 efectively guarantees you an annual return of 6.5% to 8.3% on the amount you could generate, according to Bruce Wolfe, executive director of the BlackRock Retirement Institute. Yet only 4% of those who started taking Social Security in 2016 waited until that age, according to the Social Security Administration. Patience Pays STEP 2: BRIDGE THE INCOME GAP UNTIL YOU TURN 70 Waiting to claim Social Security can boost your payouts signiﬁcantly. Here’s how it would afect a worker eligible to get $2,000 a month at a full retirement age of 67. The study suggests several strategies to generate sufficient income early in retirement to allow you to delay claiming Social Security for a few more years. Among the suggestions: Continue working longer if possible, at least enough to cover your basic living expenses such as housing, taxes, utilities, transportation, food, and insurance. Meanwhile, see if you can slash your discretionary spending in the ﬁrst few years of retirement to give you added breathing room. Discretionary expenses include things like travel, entertainment, dining out, memberships, and charitable donations. Consider using a reversemortgage line of credit as a pool of funds to help cover living expenses, especially if working later in life isn’t possible owing to health or economic circumstances. In a traditional reverse GETTING HELP 7SGMEP7IGYVMX]1MWXEOIW 'ER'SWX=SY8IRWSJ 8LSYWERHWSJ(SPPEVW ,IVIŞW,S[XS+IX +SSH%HZMGI M O N E Y. C O M M AY 2 0 1 8 MONTHLY PAYOUTS 62 years old $1,400 63 $1,500 64 $1,600 65 $1,733 66 $1,866 $2,000 $2,160 $2,320 $2,480 CLAIMING AGE 67 68 69 70 NOTE: Assumes a single worker born after 1960 with an average annual salary of $60,000. SOURCE: AARP Social Security calculator It’s one of the most important decisions you’ll ever make. But it’s not always easy to find reliable advice on how and when to claim Social Security. It doesn’t help that government workers tasked with advising the public don’t always tell beneficiaries the moves that would yield them the highest benefit, watchdog reports and experts say. “They are consistently inconsistent,” says financial planner Mary Beth Franklin, a contributing editor at InvestmentNews. More than three-quarters of widows and widowers, for instance, were eligible to receive higher benefits than they did but were never informed, according to a mortgage, homeowners 62 or older can tap the equity they’ve built up in their house and receive monthly payments until they either pass away or move. In a reversemortgage line of credit, money is made available to you, but you don’t have to start receiving it until you need the cash. And if you don’t tap it immediately, that line of credit can grow with interest. Consider building a “retirement transition bucket.” You can fund this account with a portion of your retirement savings equal to the total amount of Social Security you’d forgo by waiting until age 70 to claim. Here’s how that would work: Say you retire at 65 and would have received the average monthly benefit of $1,369 (or about $16,000 a year) if you claimed at that age. That means you should move roughly $95,000 from savings into the transition bucket to cover the amount you would have received in benefits from age 65 to 70, indexed for inflation. This pot should be invested in an easily accessible fund with minimum volatility, such as a report by the Social Security Administration’s Oice of the Inspector General. Social Security Administration oicials are “currently developing our action plan that responds to the recommendations” outlined in the inspector general’s report, according to a spokeswoman. money-market fund or a shortterm bond fund. STEP 3: CREATE A “PAYCHECK” AND “BONUS” SYSTEM Once you reach age 70½, the Internal Revenue Service requires you to withdraw a minimum amount each year from your tax-advantaged 401(k) or IRAs and pay ordinary income taxes on it. The government regards these required minimum distributions (RMDs) as a way to get its hands on money that’s been tax-sheltered for decades. But you should think of RMDs as your annual “retirement bonus,” the report says. By contrast, think of your Social Security as your “retirement paycheck,” a fixed amount adjusted annually for inflation that covers basic living expenses. Just like the bonuses you get at work, the amount generated from your RMDs will fluctuate—in this case, with your age and the market performance of your retirement accounts in the prior year. Keep a hefty portion of the money you withdraw via RMDs in stocks, the report recommends. If you can stomach the volatility, you In the meantime, where’s a pre-retiree to turn for guidance? While free online calculators, such as AARP’s, are helpful, it often pays to seek out a professional. You can ﬁnd one at Garrett Planning Network, a national network of independent planners who charge by the hour or project. Most Gar- can go as high as 100% equities— remember, you’re getting a large chunk of your income from Social Security, which is guaranteed and bond-like. Yet if that allocation would keep you up at night, stick to 50% or 60% in stocks, the authors advise. STEP 4: FINE-TUNE YOUR STRATEGY In addition to your retirement account, the report recommends you maintain an emergency fund that wouldn’t be tapped for regular income. Also, if you want to spend more money in your early years of retirement, say, to travel, then set those funds aside. For example, if you budget an extra $5,000 for fun for the first five years of retirement, put $25,000 in an account that isn’t used to generate retirement income. This approach won’t make up for inadequate savings, Vernon cautions. And it also won’t protect against catastrophic long-term-care expenses, which can quickly drain savings. But “Spend Safely in Retirement” has many advantages, including a simple design most retirees can execute on their own. rett advisers provide retirement planning advice, including Social Security help, but it’s always a good idea to ask prospective planners about their expertise. There are also online services. One of Franklin’s favorites is SocialSecurityAdvisors.com, which charges from $24.95 to $124.95 for customized claiming help. Workers with 401(k)s can also talk to their plan administrators. Fidelity offers free Social Security claiming advice from trained professionals to its plan participants at 800-835-5097, says Tom McGirr, senior vice president. —E.O. M AY 2 0 1 8 M O N E Y. C O M 8,) 1-00)22-%0 132)= ;,-74)6)6 :MGOM6SFMR[VSXIXLIFSSOSRVIXMVMRKLETT] 2S[E[LSPIRI[KIRIVEXMSRMWXEOMRKLIVEHZMGI &] )0-> %&) 8,3Ş&6-)2 M O N E Y. C O M M AY 2 0 1 8 PHOTOGRAPHS BY IAN ALLEN %YXLSV:MGOM6SFMRSR EJEZSVMXIXVEMPRIEVLIV LSQISR;LMHFI]-WPERH ;EWLMR1EVGL :-'/-63&-2 had no idea she’d become a millennial icon. • The 72-yearold coauthor of the 1992 bestseller Your Money or Your Life was recuperating from a hip replacement early last year when a young man she’d met at a sustainability event months prior told her she was popular on a Reddit forum about financial independence. • At the time, she was confined to the pullout couch of her Whidbey Island, Wash., living room, with its view of the Cascade Mountains and Puget Sound. So she had plenty of time to explore the online community where, to her surprise, she discovered she was something of a celebrity. M O N E Y. C O M M AY 2 0 1 8 V I C K I R O B I N A N D T H E F I R E M OV E M E N T “It was stunning,” Robin says. “I’m an elder in a community I didn’t know existed.” Robin’s fans belong to an impassioned, mostly millennial movement known online as the FIRE community, or simply FIRE. It’s an acronym that stands for “financial independence, retire early.” Adherents track down to the penny where their money goes, mindful of how much each purchase will really cost, with the idea that dollar amounts should be equated to “hours of life energy,” in Robin’s words. So if you make $300 a day and want to buy a $100 pair of shoes, you ask yourself: Are those shoes really worth nearly a third of a day of your precious time on earth? As the first part of the acronym suggests, the goal of the movement is to gain financial independence, meaning you’re no longer relying on paid employment to keep afloat. It’s no coincidence that the ranks of FIRE followers are spreading like, well, wildfire right now: The stock market has been very good to investors in recent years, especially to those who understand the magic of compound interest. Unemployment is low, and opportunities to earn extra money in the sharing economy are plentiful. Add the do-it-yourself spirit of a generation that can learn anything on YouTube, and you’ve got ripe conditions for a movement. What’s more, we all know that a traditional retirement is a thing of the past. No one works for 40 years at the same company anymore and retires to a front porch with a gold watch and a pension to show for it. So instead of tweaking the traditional model around the edges, -ŞQER IPHIVMR EGSQ QYRMX] -HMHRŞX ORS[ I\MWXIHš —VICKI ROBIN these young people are saying, let’s just blow up the whole concept of career, and retirement, and start from scratch. The financial independence subreddit has more than 350,000 subscribers around the world. A directory on the blog Rockstar Finance counts nearly 1,600 personal finance blogs, many dedicated to early retirement. Grant Sabatier, 32, was living with his parents in 2010 and eking out a meager postcollege existence when he came across Your Money or Your Life. “It completely changed my life and trajectory,” he says. “It is still my favorite book of all time.” Sabatier, who says he amassed a fortune of more than $1 million in five years primarily through lucrative web-design side gigs, founded Millennial Money, an online community dedicated to personal finance education and entrepreneurship. To say Robin is an unlikely financial guru is an understatement. She didn’t spend any time on Wall Street, and she seems more inclined to pass along her favorite kombucha recipe than the name of a favorite mutual fund. She speaks not in the empathetic bursts of Suze Orman but in the melodic voice she uses to sing soprano in a local choir. Her look these days is Golden Girls chic—and while she would seem like a blast to live with, she lives alone above two tenants, whose rent more than covers her housing expenses. Having paved the original FIRE path decades ago, Robin hasn’t worked for a traditional paycheck in 50 years. After stints as an actress and in film production in New York City, she parlayed an inheritance at age 23 into a modest income that sustained a groovy 1970s lifestyle in which she lived in an “intentional community,” which is kind of like a commune, but less marginalized and more centered around mutual values—“the sharing economy before it was the sharing economy,” she says. There, Robin taught herself practical skills, from auto repair and hunting to “making booze from dandelions,” a DIY strategy to become self-reliant by acquiring know-how that would enable her to tread lightly and travel cheaply through life. It was only when people began asking how she lived on so little money that Robin realized she had a story to tell. She and her friend Joe Dominguez, with whom she had lived in the intentional community, M AY 2 0 1 8 M O N E Y. C O M V I C K I R O B I N A N D T H E F I R E M OV E M E N T teamed up to give ﬁnancial education workshops around the country. They spread their money values, including planet-friendly frugality, the old-fashioned way in those pre-Internet days. Dominguez, who retired from a brief career on Wall Street at age 31, gave the lectures, and Robin produced them. The two used their experiences to cowrite the ﬁrst version of Your Money or Your Life in the early 1990s, a process she says took just nine months. The book ﬁrst hit shelves in 1992, when she was 47. The revised second edition of Your Money or Your Life is due out this spring. Robin wanted to write something for today’s millennials, whose prospects she worried were crimped by student debt. She had already begun working on the new draft when she discovered that the original still lived on Reddit; had she known that, she says, she might not even have embarked on the reboot. “It was providential,” she says. Your Money or Your Life takes readers through a nine-step program intended to transform your relationship with money. It’s not about becoming rich; it’s about ﬁguring out how much is enough. Once you buy less stuf, you won’t need nearly as much money to sustain your lifestyle as you previously did. Wisely invest the diference and wait until the interest thrown of by your portfolio exceeds your expenses. That’s the “crossover point,” Robin writes, and once you reach it, you can peace out of the paid workforce decades ahead of schedule. The FIRE movement looks at this text as a bible of sorts, one that legitimizes its followers’ path to M O N E Y. C O M M AY 2 0 1 8 ﬁnancial success and ofers freedom from being a corporate drone, and ultimately a more satisfying life— a life typically sought after by the 65-and-older crowd. It sounds great. Who wouldn’t want to be in retirement bliss by 40, learning how to make his or her own version of dandelion wine? But is it realistic? - -JIIP PMOISRI SJXLI PYGOMIWX TISTPI XSIZIV PMZIš —FIRE FOLLOWER TANJA HESTER T’S A VERY DIFFERENT WORLD today than it was in 1992, when Robin’s book came out. Back then, government bonds—long a favorite source of retiree income—threw of a respectable yield of around 8%. But interest rates haven’t been that plump for a long time, and the 2018 version of the book acknowledges this new reality. Instead, Robin writes about a favorite investment of the FIRE folks: low-cost index mutual funds or exchange-traded funds (ETFs). She also suggests buying real estate, as she has done—in particular, you should consider small duplexes, triplexes, and quads, where you can occupy one unit yourself and have your mortgage covered by your tenants. This approach isn’t far-fetched, but it does come with certain risks, according to ﬁnancial advisers. In order to retire at any age, a general rule of thumb holds that you need to save up at least 25 times your annual expenses. Say you need $50,000 to live on each year—you’ll need to accumulate around $1.25 million in order to withdraw 4% from it each year in perpetuity, adjusted upward for inﬂation. Robin’s calculations assume a 4% withdrawal rate, with a caveat: “Remember, this is a general example and not speciﬁc ﬁnancial instructions.” If the stock market posts strong gains, you can wind up with more money than you started with, even as you withdraw your inﬂation-adjusted living expenses of 4% each year. But if the stock market tanks, and you’re withdrawing on a declining balance, then you face the risk of running out of money. The 4% rule is a solid method, but it came from research that assumed a traditional retirement of no longer than 30 years, says John Salter, a professor of ﬁnancial planning at Texas Tech University and a partner in the planning ﬁrm Evensky & Katz/Foldes Financial Wealth :MGOM6SFMR[VSXI =SYV1SRI]SV=SYV 0MJI HIGEHIWEKS 2S[WLILEWE [LSPIRI[JERFEWI Management. All bets are of if your retirement lasts 60 years. You’ll have to watch your withdrawals closely and dial back your spending, potentially signiﬁcantly, if the market declines, he says. Early retirees also have a longer runway to experience inﬂation. Prices for regular goods and services roughly double every 25 years, so a 30-year-old early retiree will see general prices rise fourfold over his or her lifetime, Salter says. (Medical costs rise at an even sharper rate.) In other words, you had better hope that stocks continue posting inﬂation-beating gains. To be sure, there are many subcultures within the FIRE movement that all have their own spending goals and takes on Robin’s prescriptions. Some are more drastic than others. There’s regular FIRE, for all those people who want to exit the rat race early but might like to occasionally enjoy a good restaurant on the way, or hire a plumber to ﬁx their broken toilet instead of breaking out the wrench themselves. There’s also barista FIRE, for those who might need or want to supplement their savings with a part-time job at a place like Starbucks for the I N S I D E T H E P L AY B O O K 8EOMRKXLI *MRERGMEP -RHITIRHIRGI 4PYRKI 8LMRO]SYLEZI[LEX MXXEOIWXSTPE][MXL*-6)# ,IVIŞWXLITEXLXSJSPPS[ Ŝ)3 M O N E Y. C O M M AY 2 0 1 8 -JXLI] GER IRHYVI XLI MHIRXMX] GVMWMW XLIR XLI]ŞVI XLIJSPOW [LSEVI [SOIš —VICKI ROBIN health insurance—a key necessity for early retirees. On the extreme ends, there are the frugal FIRE adherents, who base a lot of their ideology on the writings of Pete Adeney, a.k.a. Mr. Money Mustache, a FIRE hero who in 2011 started blogging about his retirement at age 30 from his short career as a software engineer and the frugality and DIY spirit that contributed to his success. Adeney, now 43, is so prominent, he’s inspired a loose network of camps in his name. Devotees gather in spots like Gainesville, Fla., and Seattle for Camp Mustache, where talk of churning credit cards for points mixes with traditional camp activities like archery and bonﬁres. Adeney himself attends the annual Seattle retreat. The $425 tickets for this year’s event, to be held over 'EPGYPEXI]SYV RIX[SVXL 8VEGOIZIV]TIRR] ]SYWTIRH Your first step to financial independence means tallying your assets vs. your liabilities to get a clear picture of your net worth. Robin advocates taking this one step further and figuring out how much money you’ve earned in your entire life, starting from your very first paycheck. This “clears the fog shrouding your past relationship with money,” she writes, and dispels any myths that you might tell yourself about your earnings. In order to determine how much you can save, you have to first know how much you spend. Modern technology can help. Personal Capital, for example, is free web-based financial software that can link to your credit card and bank account and give you a detailed breakdown of your spending each month. V I C K I R O B I N A N D T H E F I R E M OV E M E N T Memorial Day weekend, sold out last November in less than a minute, as if they were for a Taylor Swift concert. On the other end of the spending spectrum, you have fat FIRE, for people who want to spend a healthy amount in retirement, maybe because they want to keep living in an expensive city. They have higher savings goals, starting around $2 million, according to a young fat-FIRE devotee in New York City. Despite their diferent strains, FIRE walkers have more in common than not. “You’re kind of an oddball in our society if you make a lot of money and choose not to spend it,” says Darrow Kirkpatrick, a former software engineer who retired early at the relatively ripe age of 50. FIRE folks love meeting up in real life so they can geek out on stuf they might not feel comfortable sharing with friends or family. You know you’ve found your tribe when you can call Roth IRA conversion laddering “beautiful” and have a sea of faces nod earnestly in agreement, as happened at a recent FIRE meet-up in New York City. 3 F COURSE, REACHING ﬁnancial independence is only part of the equation. Once you get there, you have to ﬁgure out what to do with the rest of your life—how you’ll spend a retirement that could last 50 or 60 years. That’s a whole lot of downtime, and most people planning on retiring early aren’t thinking about the looming void. “The vast majority are focused on numbers and calculations,” says Grant Sabatier. He’s now a business partner with Robin in the new website yourmoneyoryourlife.com. He believes many FIRE followers neglect the “spiritual transformation” that can happen when you change your relationship with money. The community remains overwhelmingly male and is heavy on those who naturally organize their thoughts in spreadsheets, like tech types and engineers. Some look down from their huge pile of savings on the masses who, the perception goes, mindlessly go through the motions in their day jobs so they can mindlessly spend on weekends. Missing is any acknowledgment of the privilege embedded in the ability to save 50% or 75% of your 5YIWXMSRIZIV] WTIRHMRKHIGMWMSR *MRHGLIETIV WYFWXMXYXMSRW -RZIWXMRPS[GSWX MRHI\JYRHW 1ET]SYV ŠGVSWWSZIVTSMRXš When you work, you trade your “life energy” for money, Robin says. Take this framework and use it to evaluate prospective purchases. Let’s say you calculate your real hourly wage at $20. You’ve been eyeing a new pair of designer jeans that cost $200. Ask yourself whether that purchase is really worth 10 hours of your precious life energy. Done right, the FIRE path is not about deprivation. It’s about finding cheaper ways to satisfy your needs. Say you require a new suit for a business trip. How about visiting a local consignment store before going to the mall and picking out something new? Or maybe you’ve always wanted to go snorkeling in Bora-Bora. Maximize credit card rewards points to score cheap— or even free—plane tickets. When it comes to building wealth, the simpler the investment, the better. Stick to lowcost index funds from Vanguard or Fidelity, which have expense ratios of well under 0.1%. Many FIRE devotees add incomegenerating real estate to their portfolios, either by buying an actual property or by purchasing the passive equivalent: a real estate investment trust, or a REIT fund. You’ll know you can call it quits when the total monthly income from your investments (measured by investment gains and dividends) exceeds your monthly expenses. Robin recommends making a chart for your wall that maps your work income, expenses, and investment income, so you can visualize the moment when you reach what she calls the “crossover point.” M AY 2 0 1 8 M O N E Y. C O M M E E T A F I R E FO L LOW E R 8LI=IEV3PH *PMKLX%XXIRHERX0ERHMRK ER)EVP]6IXMVIQIRX JUST FIVE YEARS AGO, Bianca DiValerio was struggling through a divorce and the last of three short sales that nearly wiped out her savings during the ﬁnancial crisis. Today the Chicago ﬂight attendant projects she’ll reach ﬁnancial independence within a year—that is, she calculates she will have saved enough so she won’t need to work for the rest of her life. “I am in disbelief that I am where I am,” says DiValerio, 39. “But the numbers don’t lie, and I worked my butt off to get here.” DiValerio is a FIRE devotee, but she doesn’t plan to actually retire when she reaches ﬁnancial independence. She loves her job too much for that. But she does hope to be choosier about her shifts and take extended breaks to travel and volunteer. PHOTOGRAPH BY SAVERIO TRUGLIA 8LI&S\IH;MRI 1IRXEPMX] DiValerio saves three-quarters of her $75,000 ﬂight attendant salary, plus she makes additional income from side hustles including selling furniture she refurbishes on Craigslist and eBay. She says she lives on roughly $20,000 a year. And, no, as she writes on her blog, it’s not because she has a sugar daddy footing her bills. So how does she do it? For starters, she owns her small studio apartment outright, and it’s in a not-so-fancy part of town. She has no children. And she has trimmed the fat out of her budget … literally. DiValerio eats mostly vegetarian, with some ﬁsh. Once she discovered how much of her paycheck went to Whole Foods, she stopped going there and now shops for groceries at Aldi and Costco instead. Bottled wine went out too, in favor of the cheaper boxed version. It helps that her hobbies are free or low-cost. “Hiking is one of my greatest joys, and that costs nothing,” she says. Thanks to her job, she can ﬂy free to many destinations, slashing her vacation costs. Low-cost trips as a volunteer help her save money also. V I C K I R O B I N A N D T H E F I R E M OV E M E N T &MERGE(M:EPIVMS LMKLƙZIWLIV HSK&YFFEEX 4VSQSRXSV]4SMRX MR'LMGEKS 8LITSMRXMWXS XLVMZIMR]SYV PMJIERHRSXJIIP PMOI]SYŞVI QMWWMRKSYXš —BIANCA DIVALERIO 8LI1EKMG2YQFIV Many folks go overboard when they start down the FIRE path, DiValerio says, slashing their spending to the bone. “You could wind up being miserable for months or years,” she says. And if you get hit by the proverbial bus, or get a terminal diagnosis, then your sacriﬁces will have been for nothing. So DiValerio says it’s good to recalibrate and ﬁnd a comfortable groove, as she did last year. In 2016 she boosted her earnings by setting a monthly goal of 100 ﬂight hours, compared with her prior average of around 60. (Flight attendants are paid only for hours actually in the air; they’re not compensated for layovers or delays.) This boosted her pay by 40%, and she banked all of it. While that decision helped turbocharge her savings, it also took a toll. She came to dread the start of the month, imagining all the hotel rooms that she’d be occupying, away from her dog and her boyfriend at the time. Flying so much is also hard on the body, with erratic sleep and eating schedules. DiValerio eased her ﬂying goals last year and loosened her budget a bit. After all, she says, “you don’t want to frugal yourself into a corner.” That is, you don’t want to reach ﬁnancial independence through draconian means, because that could lock you into a low spending rate that makes you miserable. Her goal is to amass a portfolio that throws off $2,000 a month for life, a comfortable amount for her that she expects to achieve next year if the market doesn’t tank. “The point of this is to thrive in your life,” she says, “and not feel like you’re missing out.” income to begin with. The FIRE movement, to a large extent, remains a culture of “very entitled white men who are very proud of themselves when it wasn’t much of a stretch for them anyway,” says Emma Pattee, 27, a writer based in Portland, Ore., who retired last year at 26 after making successful real estate investments. Many FIRE followers, she says, are already high-earners who “disdain all the Midwest minions who can’t get out in front of their truck loan.” Another unforeseen hazard: Some FIRE bros flame out months after pulling the plug on their jobs. When you’re clocking 14- or 18-hour days at a startup, it’s easy to fetishize a life of home brewing and farming in bucolic Vermont or rural Virginia. But actually home brewing and farming can be lonely and backbreaking work, says Pattee, who knows people who have had to publicly walk back their much-celebrated retirements when the reality fell short of their fantasy. “That’s the problem with just trying to win,” she says. So how do you fill all those decades when you no longer have to work for pay? It’s not an idle question: There’s a body of research linking early retirement to premature death. “We think it’s not about taking Social Security per se, but it’s about the act of retiring,” says Maria Fitzpatrick, an associate professor at Cornell University, who found that men who retire at age 62 have an increased early-mortality risk of about 20%. Although her research isn’t on the exact FIRE demographic—after all, it focuses on those who retired at 62 as opposed to 32 or 42—some FIRE followers are well aware of it. Adeney says retiring very early makes it easier to live a longer life than people M AY 2 0 1 8 M O N E Y. C O M V I C K I R O B I N A N D T H E F I R E M OV E M E N T M E E T A F I R E FO L LOW E R who retire in their early sixties. In many ways, FIRE followers are forging into uncharted territory. We don’t have any data on whether extreme early retirees have a tendency to get sicker or even die earlier in greater numbers than their traditionally employed peers, whether they burn out from all the leisure time and return to paid work, or whether they instead live decades in fulfilled contentment, nurturing their passions and giving back to their communities. Tanja Hester, a FIRE follower who leans toward the frugal strain of the movement and retired late last year at age 38 from her career as a consultant for political and social causes, realizes she’s in a privileged position. “I feel like one of the luckiest people to ever live, and if I can’t use some of it to help others, it will feel like a waste,” she says. She and her husband, who live in the North Lake Tahoe area of California, volunteer at the local humane society and plan to start teaching financial basics in their community. For her part, Robin gives back by investing in local businesses. Aside from using royalties to pay for cancer treatments in the mid-2000s, she says she’s given away a significant portion of the money she’s made over the years from her bestseller. And she still thinks our society places too much stock in paid work. She knows the FIRE walkers have an uphill battle, both in their personal finance goals and in the cultural norms they’re bucking. Still, she wishes the best for those who would follow in her footsteps. “If they can endure the identity crisis, then they’re the folks who are woke, and they can take action,” she says. “There’s another generation, hallelujah, that’s adopting these values.” M O N E Y. C O M M AY 2 0 1 8 8LI1MPPIRRMEP'SYTPI &EROMRKE=IEV SOME KIDS WANT TO BE A FIREFIGHTER, an astronaut, or a ballerina when they grow up. Lily He wanted to be a millionaire. Lily and her parents immigrated to the U.S. when she was 9 and lived in poverty on the outskirts of San Francisco. She had just two pairs of pants in elementary school and couldn’t aford glasses, even though she had trouble seeing the blackboard. Now 26, Lily is working to ensure that she—and any future children she might have—never experience poverty again. She and her husband, Jared, save $150,000 a year and project they’ll become ﬁnancially independent by 2029. “I’ve been pretty much planning this since I was 12,” she says. She and Jared live in Seattle, where Jared is a software engineer and Lily works as a full-time Airbnb host, renting out an investment property and two bedrooms in her and her husband’s primary home on the outskirts of town. “We’re hard-core,” she says. )HYGEXI =SYVWIPJ 7XE]%[E] *VSQ7XYJJ When Lily met Jared soon after graduating from college, she learned he had plunked his earnings into a savings account that brought in about 0.01% interest. So she began to teach herself investing, diving into the Bogleheads forum, an online discussion group named after Vanguard founder Jack Bogle. “It was a steep learning curve,” she says. But she plowed on, persuading her husband to begin contributing more to his workplace 401(k) and investing future savings in low-cost index funds. Lily established a retirement account for herself so she could put the Airbnb rent she collected into taxdeferred savings. Lily was never an acquisitive child, maybe because acquiring wasn’t even an option. Her mother and father made less than $6 an hour chopping vegetables and meat at a Chinese grocery store, and there wasn’t any money left over for an allowance. Plus, her mom objected in principle to the American practice of handing out money for every A on a report card. When she went to the mall with friends, Lily wasn’t tempted by the trinkets they bought. “I was always perplexed by why my friends wanted so many things, she says. A $7 lip gloss wasn’t worth more than an hour of her parents’ time, she would think. Today she enjoys free entertainment with her husband, like headbanging to Scandinavian heavy metal. They used to go to concerts, but now they simply dance around the living room. “Don’t attach purchases to happiness,” Lily says. “That’s the secret to getting of the treadmill.” PHOTOGRAPH BY IAN ALLEN 0MP],I[MXLLIV LYWFERH.EVIH ERHXLIMVHSK+VEGI EXXLIMVLSQIMR 7IEXXPI &]7,%-2%1-7,/-2 *-< -8 94 *%&90397 ,31) 6)23:%8-327 *36%2= &9(+)8 CHANCES ARE YOUR HOME is the most expensive thing you’ve ever bought. Yet if you’re like most of us, what you spent to acquire it is only the beginning. Anyone who’s seen hit shows like Fixer Upper and Property Brothers knows that home renovations are something of an American obsession. As a group, we’re expected to spend $340 billion fixing up our homes this year, according to Harvard University researchers. That’s about four times as much as we spend on summer vacations and nearly as much as we sock away annually in our 401(k)s. Despite what you see on TV, home renovations aren’t necessarily a great investment. In fact, the average remodeling job recoups less than two-thirds of its cost at sale, according to trade publication Remodeling magazine. Not that you should be deterred. They’re not called dream homes because they’re practical. What you do need to do is plan carefully and make smart choices. With that in mind, we talked to experts, including contractors, real estate agents, and interior designers, about the smartest ways to approach the home upgrade you’ve always longed for, from the practical, like installing smart lights ($100 to $600), to the truly extravagant, like your own indoor pool ($24,000 and up). M O N E Y. C O M M AY 2 0 1 8 ,S[XSKIXXLIFIWX ZEPYI[LIXLIV]SYV HVIEQMWXSS[RE FIEYXMJYPTMIGISJ HIWMKRIVJYVRMXYVISV XSKSSTIRTPER M AY 2 0 1 8 M O N E Y. C O M 92()6 'SRUYIV'PYXXIV ś 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 Š1EOISVKERM^MRK TEVXSJ]SYVHEMP] PMJINYWXPMOIHMIXMRK ERHI\IVGMWIšWE]W TVSJIWWMSREPSVKERM^IV 0E]RI&VSSOWLMVI M O N E Y. C O M STUDIES SHOW that living in an organized home lowers stress hormones, and that’s good for your health. Fancy solutions like installing custom-built closet shelves cost $1,000 to $3,000. But there’s plenty you can do without spending anywhere near that much. Start with the most critical areas—your kitchen, bathrooms, and closets, recommends Layne Brookshire, an Austin-based professional M AY 2 0 1 8 organizer. “The contents of them are constantly cycling, leaving them very susceptible to total chaos,” she says. Label makers ($25, officedepot.com), drawer dividers ($3.49–$57, the Container Store), and door hooks ($10, Bed Bath & Beyond) all help. But the key elements, according to Brookshire, are clear storage boxes. “These are the only items I bring to every client’s home before I even start,” Brookshire says. She recommends getting a variety of sizes—such as small ones that hold items like spare keys and sunglasses ($1.69, the Container Store) and oversize ones to slide under beds ($22). The clear plastic will make it much easier to ﬁnd what you’re looking for if (or, let’s face it, when) you forget where you stashed it. “You can see everything at a glance,” she says. FIX IT UP! ś B O O K S H E LV E S A N D P R E V I O U S S P R E A D : G A P I N T E R I O R S ; H O M E C I N E M A : G E T T Y I M AG ES ; L I G H T BU L BS : COU RT ESY O F P H I L I PS 94 =396)28)68%-21)28 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 HOLLYWOOD STARS HAVE BEEN INSTALLING home cinemas for years, but falling prices and improving technology mean you can do it too. The average price of a home projector was $869 last year, according to PCMag.com data, down from more than $3,700 in 2001. Meanwhile, oversize “home theater” televisions still cost about $2,700 on average. What’s more, plenty of the mid-price options, like the $545 Optoma HD142X and the $700 Epson PowerLite 1781W, got top marks from online reviewers. Projectors might do more these days, but you’ll still need to make some compromises. Though most home projector models come with HDMI, USB, and computer connection ports, connecting to cable is difficult, so they work best for cord cutters. Additionally, built-in sound is generally not as good on projectors as it is on TVs. If that’s a deal breaker, consider connecting a speaker system. ś EVSSQ '%78=396,31) -2%2);0-+,8 *6)7,)2 =3964%-28 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 MOVE YOUR HOME into the MORE THAN TWO-THIRDS of real estate agents recommend repainting the inside of your home before putting it on the market, according to a 2017 survey by home-renovation website Houzz. Other studies have shown a fresh coat in the right shade can add thousands to your sale price. In recent years, neutral tones like gray, beige, and “greige,” a mix of the two, have been popular, according to the National Association of Home Builders. If you’re willing to do the job yourself—and there’s no reason you shouldn’t—repainting can be one of the cheapest ways to spruce up your living space for prospective buyers or your own enjoyment. A 10-by-12-foot room with eight-foot ceilings should require one gallon ($30–$60 at Home Depot) per coat, according to paint brand Glidden’s online calculator (glidden.com/how-muchpaint-do-i-need). Factoring in other necessities like brushes, tarps, and painter’s tape, and assuming two coats of paint, you should expect to pay $200 to $300 per room to paint yourself, or $400 to $800 to hire a professional, according to Angie’s List. future by replacing your old incandescent light bulbs with Wi-Fi- or Bluetooth-enabled versions that save energy and make your light switch obsolete. Companies from GE to Ikea manufacture these so-called smart bulbs, which often, but not always, require connection to a central hub. A starter kit of four light bulbs plus hub device from Philips Hue, one of the systems favored by gadget site Tom’s Guide, is $100. Packs of four additional bulbs cost $50. Considering that the average home has close to 40 light bulbs, you can outfit your entire home with smart bulbs for $550. Assuming you haven’t already upgraded to LED or CFL bulbs, you will also cut the cost of lighting your home by half or more. ,SQITVSNIGXSVW EVIRS[GLIETIV XLERQER]8:W M AY 2 0 1 8 M O N E Y. C O M &)8;))2 %2( 8IRH =SYV 3[R +EVHIR ś 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 M O N E Y. C O M A LITTLE LAWN CARE can go a long way. Six applications of fertilizer and weed control, a project that should cost roughly $330, returns $1,000 at sale, according to a recent survey by the National Association of Realtors. Willing M AY 2 0 1 8 to spend a bit more? A stone walkway lined with greenery estimated to cost $4,750 returns an average of $5,000 at sale, the survey found. Why? “You can only have one ﬁrst impression,” says Bufalo appraiser Jim Murrett. Just be sure to keep it simple. While maintaining a well-kept lawn is usually smart, don’t expect extras like elaborate designs, paver stones, or fountains to hold their value. “You don’t want to be above the top,” Murrett says. FIX IT UP! 3;2%2,)-60331 7%:)=396)2)6+= GA R D E N : GA P I N T E R I O RS ; COUC H : G E T T Y I M AG ES ; SAU N A : COU RT ESY O F T Y LO H E LO 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 AS MANY AS NINE in 10 houses in the U.S. are under-insulated, according to the U.S. government’s Energy Star program. What about yours? Chances are good if it was built before 1980 or your winter heating bills regularly top your neighbors’, says Dan DiClerico, in-house expert at renovation website HomeAdvisor. To ﬁnd out for sure, check the attic for at least 11 inches of ﬁberglass insulation or eight inches of cellulose insulation.“If it’s dirty, that’s a good sign that it’s at the end of its service,” he says. Fixing the problem can cut your heating bills by about 10%, according to the Environmental Protection Agency—a huge potential win in colder states like Connecticut and Rhode Island, where heating oil costs can run $60 to $80 a month, according to personal ﬁnance website WalletHub. While shopping for something you won’t even see isn’t as fun as picking out the perfect color for a brand-new kitchen, the monthly savings can be signiﬁcant, considering the modest cost of the project. The average price to professionally install ﬁberglass attic insulation was $1,343, according to a 2017 estimate from building-industry trade publication Remodeling magazine. ;IPPQEHI JYVRMXYVIXLEXŞW GEVIHJSVWLSYPH PEWXHIGEHIW 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 SPENDING SEVERAL thousand dollars on a piece of furniture may seem extravagant. But if you shop wisely, what you buy should last forever, says Brooklyn-based interior designer Keren Richter.“We ﬁnd stuf going back all the way to the ’30s,” she adds. If you want to buy one beautiful item, a couch will do the most to transform your living room.“It’s usually the centerpiece,” Richter says. On the other hand, accessories like art or lamps can be less expensive and ofer more ﬂexibility if, for instance, you later need to ﬁt them into a new space. While mall chains ofer serviceable standbys, Richter says construction quality usually doesn’t match what you can ﬁnd in antique shops or from small, independent designers if you put in the time to research your purchase. Don’t know where to start? For new designs try Etsy or furniture website workof.com. If vintage is more your style, head to 1stdibs, an online aggregator for antique shops. One tip: A well-made couch or chair should be able to be reupholstered again and again. Consider purchasing a less expensive piece and using the remaining room in your budget to re-cover it, says Richter. Expect to spend anywhere from $500 to several thousand dollars for a project including extras like tufting and throw cushions. 2I[MRJVEVIHWEYREW SJXIRGSWXSRIƙJXLSJ [LEXGYWXSQFYMPX XVEHMXMSREPQSHIPWHS 1%/)):)6=(%= %74%(%= 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 ONCE THE PROVINCE of luxury spas, it has gotten surprisingly inexpensive to put a sauna in your own home. While traditional saunas rely on hot rocks to make steam, a newer approach, which employs infrared rays that mimic the sun to heat bathers, has fast been gaining adherents in the past few years. (Lady Gaga recently sang the praises of her in-home infrared model on Instagram.) One benefit is that infrared saunas heat your body more quickly, says Mark Raisanen, general manager at Minnesota-based sauna maker TyloHelo. But that’s not the biggest advantage. While a traditional, custom-built sauna can easily cost $25,000, Raisanen says many prebuilt infrared models run from $2,000 to $6,000. TyloHelo’s most popular infrared option, the 38½-by-48-by-77inch S820 model, costs $3,590. M AY 2 0 1 8 M O N E Y. C O M M O N E Y. C O M M AY 2 0 1 8 STO C KSY &Y]IVWJEZSV GPEWWMGXSYGLIW PMOIWYF[E]XMPI ERHWXEMRPIWW WXIIP FIX IT UP! %&3988,%8 /-8',)2 6)13()0 * FROM JULIA CHILD’S utilitarian rows of hanging copper pots (now on display at the Smithsonian) to Ina Garten’s sunny white cabinets, no single space says as much about us—and our aspirations—as the kitchen. Perhaps it’s no wonder that this room was the No. 1 most renovated interior in 2016, according to a survey by home-design website Houzz. And along with the master bath, it’s also the room most carefully scrutinized by potential homebuyers, according to Trulia. The problem, however, is that all those dream features—from marble countertops to elaborate wine coolers—are pricey, and it’s easy to let costs spiral out of control. Houzz also found that just under a third of homeowners spent $50,000 or more redoing their kitchens in 2016. Nearly one in 10 said they spent over $100,000. Of course, there’s nothing wrong with splurging if you can aford it. But don’t fool yourself into thinking those extras will hold their value. According to a survey by Remodeling magazine, major kitchen renovations, costing $60,000 or more, typically earned back only about 60% of what was spent when a house was sold. “Cost is not always equal to value,” says Bufalo-based home appraiser Jim Murrett. If, like most of us, you need to stick within a budget or are hoping to recoup costs, making smart decisions upfront, like focusing on smaller, more functional upgrades, can make a big diference, Murrett says. And the numbers back that up. More modest kitchen jobs, in the $20,000 range, typically earned back about 80%. Here’s what you need to know: A M E R I C A’ S F A V O R I T E P R O J E C T 78%=2)986%0 Vibrant colors and ﬂashy materials are in, according to design experts at Trulia and elsewhere. The trick is to be on trend without seeming trendy. “You don’t want anyone to come in and hate it,” Longmeadow, Mass., appraiser Nick Gelfand says. If you plan to sell anytime soon, stick with classic features like subway tile, stainless-steel ﬁxtures, and granite countertops. Then, to add style, try a splash of colorful paint or accent wallpaper, both of which are inexpensive and easy to remove, instead of adding costlier, more permanent touches like soapstone or slate countertops. '330-832 8,)'%&-2)87 At up to $1,200 per square foot, custom cabinets are an easy way to blow out your remodeling budget without adding much value to your home. “It’s important to account for what buyers look at,” Gelfand says. “Most can’t tell high-end cabinets from mid-range ones.” Gelfand recommends opting for “semi-custom” models ofered by chains like Home Depot and Lowe’s ($100 to $650 per square foot) and avoiding extras like glazing and built-in organizers, such as utensil drawers and spice racks. Even better: Save hundreds if not thousands more by working with what’s already there. Many old cabinets can simply be sanded down and refreshed with a new coat of paint or varnish, Murrett says. If that’s not an option, refacing your existing cabinets with new doors and frames can transform the look of your kitchen and typically costs one-third to half of what you’d spend on completely new ones. /23;=396 2)-+,&36,33( Aim to match but not outdo what would-be buyers are ﬁnding in neighboring homes. In a newly revitalized suburb with booming home prices, for instance, buyers might expect a luxurious kitchen attached to even a comparatively small house, according to Gelfand. That’s much less likely the case if prices are relatively sluggish and you already live in one of your area’s grander homes. One rule of thumb: If the value of your land represents more than half the value of your total property, it’s relatively easy to boost the total value with a signiﬁcant home improvement, like an upscale kitchen, Gelfand says. If your house already represents more than half the property’s total value, then improving it any further is risky. “The value of the home is already maximized,” Gelfand adds. M AY 2 0 1 8 M O N E Y. C O M &)8;))2 %2( ś 4097 +334)240%2 40%=&%00 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 NEARLY NINE IN 10 HOMEBUYERS want partially or fully combined kitchen and dining areas, according to a study published earlier this year by the National Association of Home Builders. The problem: Many homes, especially older ones, lack them. Depending on the style of house you own, creating one could be surprisingly inexpensive. In ranch and split-level homes, interior walls, such as the one separating the kitchen and dining room, typically don’t bear structural loads or contain heating and plumbing apparatuses, says Warren Douglas Graves, owner of Graves Design & Remodeling in Springfield, Va. Removing one of these so-called partition walls along with repairing the surrounding drywall typically costs $2,500 to $3,000, he says, although he recommends setting aside an additional $1,000 to $2,000 to patch the floors and paint. If you own a cape or colonial, the job is likely to be more complicated and expensive. Still, you can save by opting for an “exposed beam” renovation, with a structural frame (which can be covered in drywall and trim) visually separating the two spaces, rather than choosing a pricier “upset beam” project, which removes any trace of there being separate rooms. For an exposed beam project, budget $6,000 to $7,000, plus painting and patching costs, says Graves. For an upset beam, expect to spend at least $15,000. %RSTIRƚSSV SJJIVWQSVI WTEGIŜERH QEOIWGSQQSR EVIEWFVMKLXIV FORGET THE DRIVEWAY. You can practice indoors all winter like an NBA star. To be sure, a full 94-by-50-foot indoor court can run upwards of $50,000, and that’s assuming you have the space. But those are the exceptions not the rule for private homes, according to SnapSports, an athletic flooring company based in Salt Lake City, which installs about 1,000 play spaces a year. A 30-by-30foot practice area with synthetic flooring, painted key and foul lines, and a hoop costs as little as $5,000, or about $5.50 per square foot. Bumping up your budget to $10,000 gets you a 30-by-50-foot half court with wall pads and a logo. The company says it has installed courts of all sizes in basements, barns, and unused guesthouses. While 16-foot-high ceilings are ideal, salesman Jimmy Wood says SnapSports has worked with ceilings as low as 10 feet. =SYHSRŞXLEZIXSFI1MGLEIP .SVHERFYXLILEWSRIXSS M O N E Y. C O M M AY 2 0 1 8 FIX IT UP! O P E N P L A N : C AVA N I M A G E S ; I N D O O R C O U R T: C O U R T E S Y O F S N A P S P O R TS ; W I N D O W S : STO C K S Y -XŞWRSXNYWX GYVFETTIEP2I[ [MRHS[WGERWLEZI LYRHVIHWJVSQ]SYV LIEXMRKFMPP 6ITPEGI3PH ;MRHS[W ś 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 REPLACING OLD WINDOWS with newer, energy-efficient ones can save you anywhere from $25 to $450 a year in heating and cooling costs, according to the government’s Energy Star program. But that’s not even the biggest reason to upgrade. New windows can do a lot to freshen your home’s appearance, while also eliminating drafts that can quickly turn of prospective buyers when you decide to sell, says Bufalo home appraiser Jim Murrett. A mid-range window replacement running about $5,000 typically delivers the best value, since the priciest options tend to be more about aesthetics than insulation, according to Zillow Talk: Rewriting the Rules of Real Estate. A full window replacement isn’t always necessary. Look for rotting frames or condensation between windowpanes as sureﬁre signs it’s time to replace your windows, says Dan DiClerico of HomeAdvisor. If the glass is damaged but not the frame, homeowners might be able to save up to 25% by partially replacing the windows with window inserts that ﬁt inside the existing frame, he adds. M AY 2 0 1 8 M O N E Y. C O M &)8;))2 %2( /IITVIQSHIPMRK GSWXWYRHIVGSRXVSP F][SVOMRK[MXLMRER I\MWXMRKJSSXTVMRX &IEYXMJ]=SYV &EXLVSSQ 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 M O N E Y. C O M THE WAY TO GET the most out of a bathroom upgrade? Spend less. The typical mid-range $19,000 remodel—one in which you add a ceramic tile floor and replace the tub, toilet, vanity counter, and medicine cabinet in an already existing M AY 2 0 1 8 five-by-seven-foot bathroom— will net you a 70% return at sale, according to Remodeling magazine. But that return can fall precipitously if you overspend. Homeowners who embarked on a more upscale $61,000 project—including moves like blowing out the footprint and installing heated floors, a frameless glass shower, and other luxuries— recouped an average of only $34,633 once the house hit the market. FIX IT UP! ,EVH[SSHƚSSVWPEWX ]IEVWSVQSVI 86-'/398 =396'33/3987 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 G E T T Y I M AG ES ( 3 ) OUTDOOR KITCHENS have gotten more and more elaborate over the past decade to incorporate luxury items like smokers and pizza ovens, according to trade publication Kitchen & Bath Design News. LeBron James recently made news when he bought a $23 million L.A. mansion whose marble grilling space included beer taps and something described as a “heated dining loggia.” You can grill in style without going crazy. Assuming you have an adequate patio, a $10,000 budget should get you a straight or L-shaped island with stone countertops as well as a refrigerator and grill housed in a custom-built cabinet, according to Mark Allen, owner of Outdoor Kitchens by Design in Orange Park, Fla. The two best ways to ensure you don’t overspend: Avoid top-line grills like ones by Viking and Alfresco, which cost $3,000 to $4,000 and which he considers overpriced. He recommends a $1,500 Lion-brand model instead. Also, skip the granite, which costs about $4,000, in favor of travertine, which runs about half the price. “Granite is too formal,” he says. “Travertine looks better outdoors—it’s a bit more rustic.” -278%008,),%6(;33(*0336 3*=396(6)%17 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 HARDWOOD FLOORS ARE PRICIER TO INSTALL than wall-to-wall carpet, but they look more elegant and in the long run may actually save you money too. For instance, the all-in cost for a mid-range red-oak floor in a 2,000-square-foot home runs from $16,000 to $23,100, according to the price calculator on home-renovation site Homewyse.com. That’s almost two times the price of carpeting the same-size space—which would cost between $8,800 and $12,000. (Exact prices vary by zip code.) Still, carpets last only about 10 years, while hardwood floors typically carry a warranty for at least 25. In other words, you’ll be on your third carpet by the time you even need to think about replacing a hardwood floor. To make sure your floor lasts, sweep and vacuum regularly, reapply a protective coating every three to five years, and sand and refinish the floors “every few decades,” says HomeAdvisor’s Dan DiClerico. “This is why we have hardwood floors that are 100 years old in historic homes,” he says. M AY 2 0 1 8 M O N E Y. C O M 4097 FIX IT UP! ś %((%2-20%; 79-8) 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 ACCORDING TO the Pew Research Center, 19% of the U.S. population lived in multigenerational family households in 2014, up from 12% in 1980. As these arrangements become more common, so-called in-law suites—additional living space that gives independence to family members like elderly parents or adult children while keeping them nearby—can look attractive. It’s often difficult for these spaces—which cost anywhere from $40,000 to $125,000—to fully cover their cost in terms of adding value to your home. But the equation can change if you weigh the outlay against other options like an apartment in an assisted-living facility ($45,000 a year on average, according to Genworth Financial). Before getting started, think carefully about your loved ones’ future needs. Outﬁtting the bathroom with grab bars can help prevent falls; undercabinet lighting brightens dim spaces; and building units at ground level will help keep the space accessible. If you’re worried about resale value, keep the space ﬂexible, says Indianapolis architect Lee Constantine. For instance, an in-law suite built adjacent to your existing living room can easily be converted into a home office or an enlarged common area. M O N E Y. C O M M AY 2 0 1 8 %PSRK[MXL9RGPI 7EQQER]WXEXIW SJJIVEHHMXMSREP ƙRERGMEPMRGIRXMZIW JSVWSPEVTS[IV ,%62)778,)792 ś 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 THE COST TO install solar panels has dropped by twothirds since 2010, according to the Energy Department. Expect to pay $15,000 to $30,000, depending on the size of your home and how much power you need, reports home-improvement website HomeAdvisor. You should get a big chunk of that back almost immediately, however, in the form of a federal tax credit worth up to 30% of your outlay. Going forward you can also count on estimated electricity cost savings of $500 to $1,500 a year, according to solar marketplace EnergySage. Kick in additional state tax incentives, and the project should eventually pay for itself. Plan to get quotes for installation costs and estimated electricity savings from at least three companies certified by the North American Board of Certified Energy Practitioners, says Ben Delman, communications director at Solar United Neighbors, an advocacy group. Homes best equipped for going solar are those without structures like chimneys or dormers that complicate installation, Delman says. It also helps to have a roof that faces south, with lots of direct sunlight, and that won’t require work anytime soon: Though most solar installations are under warranty for 25 years, they can make roof repairs a hassle. H O U S E : S T O C K S Y; P O O L : C O U R T E S Y O F E N D L E S S P O O L S )RHPIWW4SSPWŞ ƙZILSVWITS[IV QSXSVGLYVRWXLI [EXIVWS]SYGER W[MQMRTPEGI 7[MQ%PP ;MRXIV 4097 46%'8-'%0-8= 09<96= 6)896232-2:)781)28 WITH A PRICE TAG well into the six figures, installing a traditional indoor pool is going to remain a fantasy for the vast majority of us. But there are options. Swim spas—which resemble oversize hot tubs and can be installed without any ground excavation—start at $12,000 and range up to $20,000 for models with a motor to create a current you can swim against. One caveat: Spas are typically made from a single, large piece of fiberglass, meaning unless you’re planning new construction or have a barn or porch to enclose the unit, fitting it into your home can be a problem. One alternative, built by Endless Pools of Aston, Pa., comes in separate pieces that can be assembled inside an existing room. The seven-by12-foot model with swim motor costs $23,900, although that doesn’t include $800 to $1,800 for shipping and another $2,000 if you want an independent contractor to help you install it, says retail sales manager Janet Luther. M AY 2 0 1 8 M O N E Y. C O M FIX IT UP! 8,-7)%7=,31) 94+6%()+-:)7=39 8,)1378:%09) B EST VA LU E FO R M O N E Y %RI[KEVEKI HSSVMWEWYFXPI [E]XSFSSWX]SYV LSQIŞWGYVF ETTIEP - IF THERE’S ONE rule of thumb M O N E Y. C O M only $60 when you put your house on the market. “If you’re going to sell [anytime soon], this gives you almost immediate return,” says Bufalo-based appraiser Jim Murrett. While you may not think of the garage door as an object of beauty, replacing an old, battered door with a smart new one can lend your house a fresh, clean appearance, adding to its curb appeal, even if would-be buyers can’t put their ﬁnger on the reason why, M AY 2 0 1 8 Murrett says. There are other beneﬁts too—like improved insulation, especially in colder states—which can lower your energy bill. But perhaps the biggest reason for the garage door’s attractive payof: It doesn’t cost you much to begin with. Of the nearly two dozen projects Remodeling ranked, replacing a garage door was one of the least expensive. The cheapest of all the jobs Remodeling looked at— installing a new steel entry door—returned almost as much as the garage door, fetching about 91% of the average $1,170 outlay. (The report didn’t look at touch-up jobs like repainting or sodding your lawn.) The most expensive projects, costing $100,000, such as adding bedrooms or a major kitchen renovation (see story on page 56), typically recouped half or less of what they cost. C AVA N I M A G E S when it comes to home renovations, it’s that less is more. In fact, the project that delivers the best value of all, according to Remodeling magazine’s 2018 Cost vs. Value report: the humble garage door. The all-in cost of replacing an outdated garage door with an upscale steel model boosts your home’s value by 98.3% of what it costs to install. In other words, a $3,470 garage door will really set you back Pulmonary hypertension puts unbearable stress on the heart. Often misdiagnosed - as asthma, for example - Pulmonary Hypertension (PH) can cause death from heart failure. There is no cure. But at the Pulmonary Hypertension Association, we’re giving hope to PH patients and caregivers. The food lover’s heart The book lover’s heart The lover’s heart The pulmonary hypertension heart Learn how you can help at www.PHAssociation.org Home Security. Done Right. Meet the all new SimpliSafe. It’s smaller. Faster. Stronger than ever. Engineered with a single focus: to protect. More than easy to use—it’s downright delightful. All at prices that are fair and honest. Right now get free shipping at SimpliSafe.com/money SAVE LIVES NOW JOIN THE BATTLE AGAINST CANCER TODAY MARVEL STUDIOS’ AVENGERS: INFINITY WAR IS TEAMING UP WITH STAND UP TO CANCER AND AMERICAN AIRLINES TO FACE THEIR MOST POWERFUL ENEMY YET. YOU TOO CAN JOIN THE FIGHT BY FUNDING CANCER RESEARCH THAT HELPS SAVE LIVES NOW. DONATE $25 OR MORE TO STAND UP TO CANCER AND YOU’LL RECEIVE 10 AMERICAN AIRLINES AADVANTAGE® MILES FOR EVERY DOLLAR YOU GIVE. VISIT STANDUPTOCANCER.ORG/AMERICANAIRLINES TO JOIN THE BATTLE AGAINST CANCER AND TO LEARN MORE. PICTURED: MEMBERS OF MARVEL STUDIOS’ AVENGERS ALONG WITH CANCER FIGHTERS DR. PHIL SHARP AND AMERICAN AIRLINES TEAM MEMBER, SHANDRA FITZPATRICK. STAND UP TO CANCER IS A DIVISION OF THE ENTERTAINMENT INDUSTRY FOUNDATION, A 501(C)(3) CHARITABLE ORGANIZATION. AMERICAN AIRLINES AND THE FLIGHT SYMBOL LOGO ARE MARKS OF AMERICAN AIRLINES, INC. © 2018 AMERICAN AIRLINES, INC. ALL RIGHTS RESERVED. AVENGERS: INFINITY WAR IN THEATERS APRIL 2018 8LI%ZIVEKI -RGSQIMR )ZIV]7XEXIŜ ERH ;LEX-XŞW 6IEPP] ;SVXL BY K A I T L I N M U L H E R E Salary isn’t everything. See how local costs can boost (or cut) your family’s income. M O N E Y. C O M ;LIVI ŝ6IEPŞ4E]-W ,MKLIWXŜ ERH0S[IWX Highest Mid-range Lowest Some states deliver rich household income but high costs; others may have relatively low pay, but it’s cheap to live there. MONEY classified all the states, plus D.C., into one of three groups according to their adjusted median income. Turn the page to see all the state-by-state numbers. California Nebraska has the 10thhighest median income in the U.S., but the high cost of living erodes buying power— making it a midrange state. has a median income that’s solidly midrange, but the low cost of living bumps the state into the highest category. That is, how much your wages are actually worth depends largely on where you live. On some level, everyone understands that—even if you don’t have a ﬁrm grasp on precisely how far a $50,000 salary would go in California, compared with, say, Ohio. MONEY set out to ﬁnd the answer, meshing income data with a cost-of-living measurement for each state. We pulled pay data for each state, using 2015 median household income from the Census Bureau’s American Community Survey. Then we adjusted those ﬁgures according to each state’s 2015 “regional price parity”—a U.S. Bureau of Economic Analysis calculation showing how far your money will go in a given place. The higher a state’s price-parity number, the more residents will pay for items such as housing, food, and GEOGRAPHY CAN TRANSFORM A PAYCHECK. M O N E Y. C O M M AY 2 0 1 8 transportation. A price parity ﬁgure of 118.8, like Hawaii’s, means that goods and services there cost almost 19% more than the national average. Prices in Mississippi, meanwhile, with a price parity of 86.2, are about 14% less than the national average. Living expenses tend to cluster by region. The Northeast is comparatively more expensive than much of the Southeast, for example. But there are considerable diferences even among states that are neighbors. In Illinois, for example, the real value of $1,000 is $1,003. In next-door Indiana and Missouri, that rises to $1,103 and $1,120, respectively, since those are lower-cost states. In some states, such as Delaware, there’s little diference between the median household income *Hawaii and Alaska not shown in actual locations INSET: District of Columbia Florida residents have low median incomes and have to cover costs that come closer to national figures. New Hampshire households have a high median income ($70,303); living costs are only a bit above national norms. and how much it can purchase locally. Delaware has a price parity (100.4) that’s nearly in line with the national average (which gets indexed to 100). But in other areas, such as North Dakota or Massachusetts, the price-parity calculation can either add or subtract thousands of dollars from a typical earner’s spending power. A few notes: Household income doesn’t count noncash benefits and doesn’t account for property or personal income taxes, other deductions, or Social Security—so it’s not the same as take-home pay. The cost of living and average income can also vary considerably within a state, so your state’s real salary may not reflect what workers in a specific city earn or pay to live. M AY 2 0 1 8 M O N E Y. C O M 7II=SYV7XEXIŞW ŝ6IEPŞ-RGSQI Highest pay Mid-range pay Lowest pay For each state, MONEY took the median household income and adjusted it for the state’s “regional price parity”—a measure that tracks cost differences for goods and services. See how your state compares. State Median income Price parity score “Real” median income Massachusetts $70,628 106.9 $66,069 Michigan $51,084 93.5 $54,635 Minnesota $63,488 97.4 $65,183 Mississippi $40,593 86.2 $47,092 Missouri $50,238 89.3 $56,258 Montana $49,509 94.8 $52,225 Nebraska $54,996 90.6 $60,702 Nevada $52,431 98.0 $53,501 New Hampshire $70,303 105.0 $66,955 New Jersey $72,222 113.4 $63,688 New Mexico $45,382 94.4 $48,074 New York $60,850 115.3 $52,775 North Carolina $47,830 91.2 $52,445 North Dakota $60,557 92.3 $65,609 Ohio $51,075 89.2 $57,259 Oklahoma $48,568 89.9 $54,024 Oregon $54,148 99.2 $54,585 Pennsylvania $55,702 97.9 $56,897 Rhode Island $58,073 98.7 $58,838 State Median income Price parity score “Real” median income Alabama $44,765 86.8 $51,573 Alaska $73,355 105.6 $69,465 Arizona $51,492 96.2 $53,526 Arkansas $41,995 87.4 $48,049 California $64,500 113.4 $56,878 Colorado $63,909 103.2 $61,927 Connecticut $71,346 108.7 $65,636 Delaware $61,255 100.4 $61,011 District of Columbia $75,628 117.0 $64,639 Florida $49,426 99.5 $49,674 South Carolina $47,238 90.3 $52,312 Georgia $51,244 92.6 $55,339 South Dakota $53,017 88.2 $60,110 Hawaii $73,486 118.8 $61,857 Tennessee $47,275 89.9 $52,586 Idaho $48,275 93.4 $51,686 Texas $55,653 96.8 $57,493 Illinois $59,588 99.7 $59,767 Utah $62,912 97.0 $64,858 Indiana $50,532 90.7 $55,713 Vermont $56,990 101.6 $56,093 Iowa $54,736 90.3 $60,616 Virginia $66,262 102.5 $64,646 Kansas $53,906 90.4 $59,631 $45,215 88.6 $51,033 Washington State $64,129 104.8 $61,192 Kentucky Louisiana $45,727 90.6 $50,471 West Virginia $42,019 88.9 $47,265 Maine $51,494 98.0 $52,545 Wisconsin $55,638 93.1 $59,762 Maryland $75,847 109.6 $69,203 Wyoming $60,214 96.2 $62,593 NOTE: Real pay values based on 2015 median household incomes in the Census Bureau’s American M O N E Y. C O M M AY 2 0 1 8 Community Survey and the 2015 regional price parity from the U.S. Bureau of Economic Analysis. THE MONEY 50 6)'311)2()( *92(7 *YRHW TOTAL RETURN 8VEHI;EV8EPO +VMTW7XSGOW AFTER A BRIEF SCARE on Wall Street in February, the stock market averted crisis as equities rebounded in the four weeks ended March 21. New concerns, however—and a fresh bout of volatility—emerged after President Trump imposed tarifs on imported steel and aluminum, sparking concerns that this would trigger a global trade war. The result: Investors altered their strategy and began to favor small-company stocks over large multinationals. That’s because smaller businesses tend to generate most of their sales domestically. On our MONEY 50 recommended funds list, Schwab Small Cap Index gained 3.2% in the month, vs. just 0.6% for the Schwab S&P 500 Index fund. ,3;8397)3966)'311)2()(0-78 Building-block funds: For broad exposure to core asset classes Custom funds: Specialized investments that can tilt your strategy One-decision funds: If you want stocks and bonds in one portfolio TOTAL RETURN FUND (TICKER) ONE MONTH EXPENSES (AS % OF ASSETS) PHONE NUMBER (800) 18.0% 11.0% 18.1 10.5 0.03 0.03 435-4000 435-4000 16.8 18.9 8.2 9.2 0.18 0.05 662-7447 435-4000 16.7 18.7 21.3 22.8 5.2 6.7 9.3 8.3 0.16 0.17 0.25 0.32 544-8544 662-7447 662-7447 662-7447 –4.6 –0.7 0.26 662-7447 0.6 –0.1 0.8 0.6 0.15 0.15 662-7447 662-7447 ONE YEAR THREE YEARS 1 BUILDING-BLOCK FUNDS Large-Cap Schwab S&P 500 Index (SWPPX) 0.6% Schwab Total Stock Market Index (SWTSX) 0.9 Midcap/Small-Cap Vanguard Mid-Cap Index (VIMSX) 2.1 Schwab Small Cap Index (SWSSX) 3.2 Foreign Fidelity International Index (FSIIX) –0.5 Vanguard Total Intl. Stock Index (VGTSX) –0.3 Vanguard FTSEA/W ex-U.S. Small (VFSVX) 0.3 Vanguard Emerging Markets (VEIEX) 0.0 Specialty Vanguard REIT Index (VGSIX) 2.9 Bond Vanguard Total Bond Market (VBMFX) 0.3 Vanguard Short-Term Bond (VBISX) 0.0 M O N E Y. C O M FUND (TICKER) Vanguard Inflation-Protected (VIPSX) Vanguard Short-Term Infl.-Prot. (VTIPX) Vanguard Total Intl. Bond Index (VTIBX) ONE MONTH 0.8% 0.4 0.9 ONE YEAR 0.1% 0.2 3.3 THREE YEARS 1 0.8% 1.0 2.0 EXPENSES (AS % OF ASSETS) PHONE NUMBER (800) 0.20 0.15 0.13 662-7447 662-7447 662-7447 CUSTOM FUNDS Large-Cap Dodge & Cox Stock (DODGX) Schwab Fundamental U.S. Large (SFLNX) Sound Shore (SSHFX) Vanguard Value Index(VIVAX) Primecap Odyssey Growth (POGRX) T. Rowe Price Blue Chip Growth (TRBCX) Midcap Vanguard Mid-Cap Value Index(VMVIX) Vanguard Mid-Cap Growth (VMGIX) T. Rowe Price Div. Mid Cap Gro. (PRDMX) Small-Cap Vanguard Small-Cap Value (VISVX) Schwab Fundamental U.S. Small (SFSNX) Vanguard Small-Cap Growth (VISGX) T. Rowe Price QM U.S. Small-Cap Gro. (PRDSX) Specialty T. Rowe Price Dividend Growth (PRDGX) Vanguard Intl. DividendAppreciation (VIAIX) Cohen & Steers Realty Shares (CSRSX) Vanguard Global ex-U.S. Real Estate (VGXRX) Fidelity Select Natural Resources (FNARX) Foreign Oakmark International (OAKIX) Vanguard International Growth (VWIGX) T. Rowe Price Emerging Markets (PRMSX) Bond Dodge & Cox Income (DODIX) Fidelity Total Bond (FTBFX) Vanguard Short-Term Inv. Grade (VFSTX) Fidelity Corporate Bond (FCBFX) Loomis Sayles Bond (LSBRX) Fidelity High Income (SPHIX) Vanguard Intm.-Term Tax-Ex. (VWITX) Vanguard Limited-Term Tax-Ex. (VMLTX) Templeton Global Bond (TPINX)2 Fidelity New Markets Income (FNMIX) –0.4 0.4 0.0 –0.1 4.5 2.3 15.7 13.5 12.6 13.6 38.9 38.6 11.2 9.0 7.1 10.1 17.2 15.7 0.52 0.25 0.91 0.18 0.67 0.72 621-3979 435-4000 551-1980 662-7447 729-2307 638-5660 1.0 3.2 2.6 13.4 20.8 24.4 8.6 7.8 10.2 0.19 0.19 0.87 662-7447 662-7447 638-5660 1.8 2.0 3.8 3.3 12.2 13.8 23.6 22.9 8.4 8.2 8.5 10.1 0.19 0.25 0.19 0.81 662-7447 435-4000 662-7447 638-5660 0.5 –0.2 3.2 1.4 3.8 15.4 15.8 –1.5 19.0 3.4 10.1 N.A. 0.5 6.6 –1.4 0.64 0.35 0.96 0.34 0.84 638-5660 662-7447 437-9912 662-7447 544-8544 –2.9 1.5 0.6 18.5 36.5 33.4 7.3 12.8 13.2 0.95 0.45 1.23 625-6275 662-7447 638-5660 0.1 0.2 –0.1 –0.1 0.2 –0.4 0.0 –0.2 –0.2 0.0 2.0 1.3 0.5 2.7 4.3 6.0 2.2 0.8 –0.2 4.0 2.3 2.0 1.4 2.2 2.9 5.3 1.7 0.8 1.8 7.6 0.43 0.45 0.20 0.45 0.91 0.72 0.19 0.19 0.93 0.82 621-3979 544-6666 662-7447 544-6666 633-3330 544-8544 662-7447 662-7447 632-2301 544-6666 0.55 1.03 0.25 544-6666 544-6666 662-7447 0.58 0.63 638-5660 638-5660 0.14 0.14 662-7447 662-7447 ONE-DECISION FUNDS M AY 2 0 1 8 Balanced Fidelity Balanced (FBALX) 1.0 13.8 7.2 Fidelity Global Balanced (FGBLX) 1.6 19.7 6.3 Vanguard Wellington (VWELX) 0.0 10.3 7.3 Target Date T. Rowe Price Retirement series (STOCK/BOND ALLOCATION) Ex.: 2005 Fund (36%/64%) (TRRFX) 0.5 7.5 4.7 Ex.: 2020 Fund (58%/42%) (TRRBX) 0.6 12.0 6.5 Vanguard Target Retirement series Ex.: 2025 Fund (62%/38%) (VTTVX) 0.5 12.1 6.3 Ex.: 2035 Fund (77%/23%) (VTTHX) 0.5 14.7 7.4 NOTES: As of March 21, 2018. N.A.: Not available. Load funds are included for those who prefer to use a broker. 1Annualized. 24.25% sales load. SOURCES: Lipper, New York, 877-955-4773; the fund companies THE MONEY 50 6)'311)2()( )8*W )8*W TOTAL RETURN FUND (TICKER) ŝ6IEPŞ%WWIXW +EMR7XVIRKXL coupled with a weakening U.S. dollar, drove investors into so-called real assets such as real estate and commodities. On our MONEY 50 recommended ETF list, the iShares Cohen & Steers REIT ETF gained 3.7% in the four weeks ended March 21. Meanwhile, iShares North American Natural Resources ETF rose 2.5%. RISING INFLATIONARY PRESSURES, 7 46%8-37 P/E DIVIDEND YIELD 2.1% 24.0 CURRENT 2.0 23.0 1.9 ONEYEAR RANGE 22.0 1.95 ONEYEAR RANGE 1.8 CURRENT 21.2 21.0 1.7 ,3;8397)3966)'311)2()(0-78 Building-block ETFs: For broad exposure to core asset classes Custom ETFs: Specialized investments that can tilt your strategy One-decision ETFs: If you want stocks and bonds in one portfolio TOTAL RETURN ONE MONTH FUND (TICKER) ONE YEAR THREE YEARS 1 EXPENSES (AS % OF ASSETS) PHONE NUMBER (800) BUILDING-BLOCK ETFs Large-Cap Vanguard 500 ETF (VOO) Schwab U.S. Broad Market ETF (SCHB) Midcap/Small-Cap iShares Core S&P Mid-Cap ETF (IJH) iShares Core S&P Small-Cap ETF (IJR) Foreign iShares Core MSCI EAFE ETF (IEFA) Vanguard Total Intl. Stock ETF (VXUS) M O N E Y. C O M 0.6% 18.0% 11.0% 0.9 18.2 10.5 0.04 0.03 662-7447 435-4000 2.3 3.3 15.7 18.9 9.4 11.4 0.07 0.07 474-2737 474-2737 –1.4 –0.3 16.9 18.7 6.3 6.7 0.08 0.11 474-2737 662-7447 M AY 2 0 1 8 Vanguard FTSE A/W ex-U.S. Small (VSS) Vanguard FTSE Emerging Markets (VWO) Specialty Vanguard REIT ETF (VNQ) Bond Vanguard Total Bond ETF (BND) Vanguard Short-Term Bond ETF (BSV) Schwab U.S.TIPS ETF (SCHP) Vanguard Short-Term Infl.-Prot. (VTIP) Vanguard Total Intl. Bond ETF (BNDX) ONE MONTH ONE YEAR THREE YEARS 1 0.3% 21.5% 9.4% 0.0 23.0 8.5 EXPENSES (AS % OF ASSETS) PHONE NUMBER (800) 0.13 0.14 662-7447 662-7447 2.9 –4.5 –0.6 0.12 662-7447 0.3 0.1 0.6 0.4 0.9 0.7 0.0 0.3 0.3 3.3 0.9 0.7 0.8 1.1 2.0 0.05 0.07 0.05 0.06 0.11 662-7447 662-7447 435-4000 662-7447 662-7447 12.8 13.7 11.8 11.9 13.9 23.6 8.9 10.3 9.5 10.1 10.7 11.5 0.39 0.06 0.28 0.15 0.29 0.06 983-0903 662-7447 909-94732 474-2737 983-0903 662-7447 13.5 10.2 21.0 8.7 8.9 7.9 0.07 0.38 0.07 662-7447 909-94732 662-7447 12.3 9.5 18.1 23.8 8.5 8.2 9.4 8.7 0.07 0.38 0.39 0.07 662-7447 909-94732 983-0903 662-7447 10.1 15.9 –3.8 19.3 2.2 10.4 N.A. –0.4 6.8 –1.3 0.35 0.25 0.34 0.14 0.48 787-22572 662-7447 474-2737 662-7447 474-2737 –1.0 15.4 5.7 0.45 983-0903 –0.2 –0.1 14.1 17.7 6.4 8.3 0.20 0.65 474-2737 787-22572 0.2 0.3 0.1 1.1 1.4 1.6 1.7 1.3 1.5 0.45 0.61 0.35 343-3548 400-43832 400-43832 –0.5 –0.1 –0.4 –0.1 –0.2 1.9 0.6 3.8 2.5 0.1 1.7 1.4 3.6 N.A. 0.4 0.15 0.07 0.49 0.09 0.20 474-2737 662-7447 474-2737 662-7447 787-22572 –0.5 –0.4 12.8 8.7 3.2 4.4 0.50 0.40 983-0903 787-22572 0.4 0.4 0.4 0.4 0.6 6.5 8.2 11.7 15.1 15.2 3.6 4.4 6.0 7.5 5.0 0.25 0.25 0.25 0.25 0.35 474-2737 474-2737 474-2737 474-2737 787-22572 CUSTOM ETFs Large-Cap PowerShares FTSE RAFI U.S. 1000 (PRF) 0.3 Vanguard Value ETF (VTV) –0.1 WisdomTree U.S. LargeCap Dividend(DLN) –0.2 iShares Edge MSCI Min.Vol. USA (USMV) 1.1 PowerShares S&P 500 High Qual. (SPHQ) 0.1 Vanguard Growth ETF (VUG) 1.4 Midcap Vanguard Mid-Cap Value ETF (VOE) 1.0 WisdomTree U.S. MidCap Dividend (DON) 0.8 Vanguard Mid-Cap Growth ETF (VOT) 3.2 Small-Cap Vanguard Small-Cap Value ETF (VBR) 1.9 WisdomTree U.S. SmallCap Dividend (DES) 1.1 PowerShares FTSE RAFI U.S. 1500 S-M (PRFZ) 2.4 Vanguard Small-Cap Growth ETF (VBK) 3.8 Specialty SPDR S&P Dividend ETF (SDY) 1.0 Vanguard Intl. Div. Appreciation (VIGI) –0.2 iShares Cohen & Steers REIT ETF (ICF) 3.7 Vanguard Global ex-U.S. Real Estate (VNQI) 1.5 iShares N.Amer. Nat. Res. ETF (IGE) 2.5 Foreign PowerShares FTSE RAFI Developed Markets ex-U.S.(PXF) iShares Edge MSCI MinVol EAFE (EFAV) SPDR S&P Emerging Markets Small Cap ETF(EWX) Bond Fidelity Total Bond ETF (FBND) Pimco Active Bond ETF (BOND) Pimco Enhanced Short Maturity Active ETF(MINT) iShares iBoxx $ Inv. Grade Corp. (LQD) Vanguard Short-Term Corp. (VCSH) iShares iBoxx $ High Yield Corp. (HYG) Vanguard Tax-Exempt ETF (VTEB) SPDR Nuveen Bloomberg Barclays S/T Muni (SHM) PowerShares Intl. Corporate (PICB) SPDR Bloomberg Barclays Emerging Markets Bond ETF (EBND) ONE-DECISION ETFs Balanced iShares Core Conserv.Alloc. ETF (AOK) iShares Core Moderate Alloc. ETF (AOM) iShares Core Growth Alloc. ETF (AOR) iShares Core Aggressive Alloc. ETF (AOA) SPDR SSGA Global Alloc. ETF (GAL) NOTES: As of March 21, 2018. N.A.: Not available. 1 Annualized. 2Phone numbers are 866. SOURCES: Lipper, New York, 877-955-4773; the fund companies 'ERHMH GSRZIVWEXMSRW [MXLTISTPI [IPSZI %HEQ6MTTSR SYXWMHI132)=ŞW 2I[=SVO'MX] SJƙGIMR1EVGL 8LI 132)=XEPO[MXL %HEQ6MTTSR 8LI3P]QTMGWOEXIVŞWMRZIWXQIRXWXVEXIK]# ;MRIJVSQ8EVKIXERHEFMKFIXSRLMW S[R GEVIIV BY W I L L L I N E N D O L L MONEY: How much did it cost you to train for the Olympics? ADAM RIPPON: When I’m training, the expenses can be a lot. I have a private coach that I work with every day, from 15 minutes to an hour. M O N E Y. C O M And the rate can be from $100 to $145 an hour. My costumes are done by a friend of mine, and they range anywhere between $1,200 and $4,000 each. And then I have choreography and ice time. A lot of the money that I make M AY 2 0 1 8 from skating goes right back into my career. Your ﬁnancial situation now is probably a bit diferent from a few years ago, when you were starting out. I had to really manage and budget. I would spend $50 a month to be a member of the only gym in the area. It had apples out in a little area where you could sit and have a glass of water. When money was tight, I would go into the lounge area, and I would steal all the apples. The gym also had tea, so I would take all the tea too. When I couldn’t afford to get too many groceries, I would just [eat] the apples, which I’m allergic to. You’re allergic to apples? Yeah, but when you’re dirtpoor you’re like, “Oh, I’ll take the risk.” What is the biggest money lesson that you’ve learned up to this point? You may think you know what you’re doing, but you should always ask somebody to help you. You should have somebody help you budget, make a goal sheet, plan out what you’re doing. Do you want to buy a new car? Do you want to buy a house? What I’ve learned is that you don’t always know best. Sometimes, asking for help is the hardest thing to do, but it’s also the thing that you’ll be most grateful that you did. At the end of the Olympics, you said the ﬁrst thing you would do when you got home was go to Target and buy wine. Did you end up doing that? I said that I wanted a glass of Sauvignon Blanc [from] Oyster Bay. And they actually sent me four cases of wine. So I didn’t even need to go to Target, which was great. Do you have any money weak spots? The one thing that is super dangerous is shopping online. It’s just three clicks and it’s already sent to your house in ﬁve minutes. Will you be at the 2022 Winter Olympics? I mean, if I go to the Olympics next round it’s because I found a good deal on a vacation or something. PHOTOGRAPH BY ALEXANDRA SCIMECCA Active Matters: Life isn’t a passive activity. Investing shouldn’t be either. Whether you’re planning on retiring in the not-too-distant future or years from now, being actively involved matters in achieving results. When it comes to managing our funds, we share the same active philosophy. Our investment teams seek to navigate down markets, ﬁnd opportunities, and manage risk so you can stay on track toward reaching your retirement goals. Over 90% of T. Rowe Price Retirement Funds beat their 10-year Lipper average as of 12/31/17.* Put our active investment approach to work for your retirement. We offer IRAs, Rollover IRAs, and retirement planning. Call our retirement specialists at 877-872-5475 or go to troweprice.com/retirement Consider the investment objectives, risks, and charges and expenses carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, call us. Read it carefully. *36 of our 39 Retirement Funds (Investor, Advisor, and R class) had a 10 -year track record as of 12/31/17 (includes all share classes). 34 of these 36 funds beat their Lipper averages for the 10 -year period. 38 of 39, 39 of 39, and 35 of 36 of the Retirement Funds outper formed their Lipper average for the 1-, 3 -, and 5 -year periods ended 12/31/17, respectively. Calculations are based on cumulative total return. Not all funds outper formed for all periods. (Source for data: Lipper Inc.) Past performance cannot guarantee future results. All funds are subject to market risk, including possible loss of principal. T. Rowe Price Investment Services, Inc., Distributor.