Pop Quiz: Don’t Cheat

Family Update

Big news this week: Alex passed his driver's exam! The examiner was genuinely impressed, and Alex only missed eight points. You can miss up to 30 and still pass (which basically means you run someone over). It's a little concerning to realize you can miss that many.

Can we talk about this rain? I still can't get over the fact that we live in Florida and it's been cloudy nearly every single day. This is all thanks to El Niño, and this happens to be the worst one in 155 years. It has to do with water temperatures in the Pacific, and it affects weather patterns worldwide. Unfortunately, it's expected to stick around until next spring. The orchids are not happy. I've got fans blowing on them around the clock just trying to keep them dry enough to survive it. The silver lining is that El Niño years tend to mean far fewer hurricanes. Look it up; it is a once-in-a-lifetime event.

I've been doing monthly Zoom calls with my three best friends from high school for a few years now. They started out as pure nostalgia, swapping stories and laughing about things we did decades ago. Lately though, the conversations have drifted toward aging parents and our own aches and pains. I guess that's how life works.

My wife was at the beach and an enterprising entrepreneur decided to put his ice cream truck in the water. 

POP QUIZ!!!

For those of you who diligently do your homework and faithfully read my weekly articles, you should do very well. This is a tough one.

Note: The answers follow each question. No cheating! I was trying to figure out how to make sure you don’t accidentally peek at the answer. So ... I tried to be creative. You will see what I mean below.

1. In the past five years, if you put your money into a money market or CD, you would have averaged around 4% per year. How much would your total return be if you had the money invested in the S&P 500?

A. 56%
B. 25%
C. -10%
D. 68%

Answer: One letter after C (otherwise known as D)

2. What did the stock market return, per year, in the 1990s?

A. 5 percent
B. 18 percent
C. 1 percent
D. 10 percent

Answer: Two letters before D

3. At what age should most people stop investing in stocks and bonds?

A. 60
B. 70
C. 80
D. 90
E. Never

Answer: One letter after D

4. How has the cost of a four-year public college degree changed since 1980, adjusted for inflation?

A. It's gone down
B. It's roughly doubled
C. It's roughly tripled or more
D. It hasn't changed at all

Answer: One letter after B

5. What is one of the most overlooked but valuable Social Security strategies for a married couple?

A. Both spouses always claiming at 62
B. Coordinating claiming ages so the higher earner delays as long as possible, while the lower earner takes benefits early.
C. Both spouses taking the benefits at 70.
D. Do away with the older spouse in order to marry someone rich.

Answer: One letter after A

6. Historically, what tends to happen to stock portfolios in the 12 months following a Federal Reserve rate-cutting cycle?

A. They tend to crash
B. They tend to perform reasonably well if the beta remains strong
C. They stay perfectly flat if the cycle happens in the third quarter
D. Just because it sounds fancy doesn't mean it holds significance

Two letters after B.

7. Which of these accounts is NOT subject to Required Minimum Distributions (RMD) during the original owner's lifetime?

A. Traditional IRA
B. 401(k)
C. Roth IRA
D. Inherited Traditional IRA

Answer: Two letters after A

8. During the COVID-19 crash of March 2020, the S&P 500 fell roughly 34 percent in about a month. Roughly how long did it take to recover to its prior all-time high?

A. About 5 months
B. About 2 years
C. About 4 years
D. It still hasn't recovered

Answer: One letter before B

9. When will Social Security go bankrupt?

A. In the next ten years
B. Not in your lifetime
C. In 20-30 years
D. In 10-20 years

Answer: One letter before C

10. For a living trust to actually work as intended, what critical step do many people forget to do after signing it?

A. Notify the IRS
B. Fund the trust by retitling assets into its name
C. File it with the state legislature
D. Have their cat sign it

Answer: Two letters before D

11. On average, how much less do people spend in their late seventies than they did in their late forties, which should affect their financial planning?

A. The same
B. 10 percent less
C. 40 percent less
D. 18 percent less

Answer: Two letters after A

12. When does using some of your 401(k) to pay off your mortgage make sense?

A. If you are about to retire.
B. Never.
C. If it would make you feel better and more secure.
D. If interest rates are above 6%.

Answer: One letter after A

13. What happened to the stock market in the years following the 1918 flu pandemic, one of the deadliest in history, also along with World War I?

A. It collapsed permanently
B. It marked the beginning of the "Roaring Twenties"
C. Trading was suspended for three months
D. It permanently changed how capitalism works

Answer: One letter after A

14. What is the average length of a bear market (stocks down 20% or more)?

A. 9 months
B. 1.5 years
C. 3 years
D. 5 years

Answer: One letter before B

15. Why is skilled retirement planning so awesome?

A. It helps you spend the perfect balance between too much and too little.
B. It reduces worry and increases the fun!
C. It gives you the financial rules and parameters by which you can live your retired life.
D. It harnesses the incredible power of diversified portfolios of stocks and bonds.
E. It might help you to spend more and worry less.

Answer: All of the above

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Be Blessed,

Dave