Make That Choice - HumbleDollar (2024)

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David Gartland|Apr 15, 2024

I’M NOT THE SMARTEST guy. That used to bother me when I was in school. The smart guys were making their teachers happy. They were named to the National Honor Society. They went to the best colleges. They seemed to have it all.

As I got older, and began to make more and more decisions on my own, I had to come up with a method that would allow me to make good decisions, given the limited gray matter I was working with. My strategy: I like to narrow down my choices, identify the key variables, avoid decisions with really bad potential outcomes—and then get on with my life.

Remember, every decision comes with risk—the risk of being wrong—and every decision will lead to an outcome, good or bad. The first thing I do is settle on my priorities. What am I trying to achieve? I then think about the options available to me, and try to narrow that list. I believe limiting choice reduces anxiety. If there are fewer choices to consider, it’s also easier to study each choice and make a good decision.

Among the choices I’m considering, I think about what’s the worst that could happen if I chose one option over another—and I then avoid the one with the worst possible outcome. What if the choices seem pretty much equal? I don’t worry too much about which one I choose.

I once spoke with a guy who was affiliated with my employer. He was trying to decide how to spend his money. He said his options were to buy a new truck or remodel his home. I asked him which would be best for his relationship with his wife. He chose the remodeling project. Identifying the most important variable is the key to making good decisions.

When my son was young, I decided I needed life insurance, so my wife and son would be okay financially if I died suddenly. That was my priority. The two main types of life insurance are term and whole life. Term-life insurance provides only a death benefit, has far lower premiums and is designed to provide coverage for a limited period of time, perhaps 15 or 30 years.

Meanwhile, whole-life policies provide a death benefit coupled with an investment account. These policies are designed to provide coverage for your whole life—hence the name—but the premiums are far higher. I chose term, which provided what I needed, or so I thought.

Under normal circ*mstances, once your children reach adulthood, they can make it on their own and they no longer need the financial support that life insurance might provide, so term-life insurance works well. But if you have special needs children, they might never be able to make it on their own. They’ll always need your financial support—including your financial support after your death.

As my son got older, it became evident his disability wasn’t going away. Once I realized that, I also realized whole-life insurance would have been a better choice. But by then, it would have been prohibitively expensive to buy a whole-life policy.

As a substitute, I opted to fund a Roth IRA. That also allowed me to achieve my goal. Under current rules, when you bequeath a Roth, the beneficiaries won’t owe any income taxes, just like the beneficiaries of a life insurance policy. I’ve earmarked my Roth IRA dollars for my son, so there will be a pool of tax-free money to help support him after my death.

I keep hearing lately about the “tax time bomb” that’ll be triggered when I take required minimum distributions (RMDs) from my traditional IRA.One solution touted is to convert my traditional IRA dollars to Roth dollars prior to starting RMDs, so I’ll never need to pay income taxes on those dollars again.

But while I have my Roth dollars earmarked for my son, I also need some IRA dollars for me to spend during my lifetime. That’s another priority for me. I’m happy to pay taxes on those traditional IRA dollars along the way, rather doing a big Roth conversion now and getting hit with a big tax bill.

Like Henry Ford, who was famous for making decisions and then sticking with them, my decisions on my Roth and traditional IRAs are made, and I’m not changing them. Good or bad, the choices have been made. Now, I can move on to other decisions.

David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave’s earlier articles.

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