Many financial questions have clear answers. Does it make sense to engage in day trading? Probably not. Should you invest everything in bitcoin? I wouldn’t recommend it. Is it smart to carry big credit card balances? It’s hard to think of a reason why. Many other financial questions, though, might seem to have clear answers. But upon closer examination, they actually fall into the “it depends” category. Below are six such questions:
1. Should I waste money? Consider two investors. One has a $500,000 portfolio. The other used to have a $500,000 portfolio. But now he has just $200,000—after spending the other $300,000 on a Ferrari. Most people would probably view the first as being a better steward of his finances and the second as an egregious money waster. But was that Ferrari really a waste? It certainly appears that way. But I think it depends.
Let’s put aside the question of whether the car might become a collector’s item and thus appreciate in value. Instead, let’s just see it for what it is: an exceptionally expensive toy. Through that lens, is it a waste of money? And if so, is that okay? In my view, there’s a fundamental litmus test to answer this question. You would simply ask: Will this expense jeopardize my long-term plan? In the above example, suppose the Ferrari owner has other sources of income—such as a government pension or maybe income from a rental property. If that were the case, then the size of his portfolio might not matter at all, and objectively, it would not be an irresponsible choice.
The bottom line: Some might see a six-figure car—or a similar extravagance—as an egregious waste. But that, I don’t think, should be the measure. Instead, I would rely on the simple litmus test described above. If you can afford something, and if it will bring you happiness, then that’s what matters. Some might call it a waste. But that’s in the eye of the beholder. We’re each different and value different things. I wouldn’t let anyone else judge you—and I wouldn’t feel the need to judge yourself. Indeed, as the expression goes, you can’t take it with you.
2. Should I own international stocks? Jack Bogle, founder of the Vanguard Group, was famous for saying that he never owned international stocks in his personal portfolio. His reasoning was simple: He didn’t see the need. Bogle certainly had the data to support his view. The correlation between domestic and international stocks is usually between 0.7 and 0.9. (Correlations are measured on a scale from -1 to 1, so this indicates a high level of correlation.)
In contrast, many bonds have very low correlations with stocks. In other words, international stocks offer some diversification benefit, but it’s limited. Bonds, on the other hand, offer a far easier and more effective route to a diversified portfolio. Does that mean that, like Bogle, you shouldn’t own international stocks either? It depends.
There is an important reason an investor might want international stocks. Yes, Bogle was right that international and domestic stocks are highly correlated. But still, they’re not perfectly correlated. Because of this, Vanguard’s own research indicates that an allocation between 20% and 40% to international stocks might yield the optimal diversification benefit. That is to say, international stocks can help lower a portfolio’s volatility.
But if, like Bogle, you prize simplicity and don’t mind a little more volatility, then you might forgo international stocks and not give it a second thought. That’s because there’s a difference between reducing a portfolio’s volatility and increasing its returns. International diversification has been proven to deliver only the former but not necessarily the latter.
3. Should I cancel my life insurance policy if I no longer need it? If your assets have grown over the years, and your children are out of the house, then the math might indicate you no longer need life insurance. Does this mean you should cancel it? It depends. In some cases, the math is easy. But there are at least two cases in which you might decide to retain a policy, at least for the time being.
If you have a policy with a cash value, such as whole life, then you’ll want to do the math carefully. It may be that the accumulated gains in the cash value would leave you with a big tax bill if you liquidated the policy. If that were the case, you might consider keeping the policy going until retirement, when you might be in a lower tax bracket. In the meantime, you might look into a 1035 exchange to lower the annual carrying costs.
The other reason you might retain life insurance even when the math says you don’t need to: because life is uncertain. The value of your assets might fall, for example, or you might have an unexpected expense. For that reason, I’ve seen more than one family choose to retain life insurance beyond when it’s objectively necessary. If it provides additional peace of mind, and the cost isn’t burdensome, I see nothing wrong with that.
4. Should I worry about estate taxes if I’m clearly under the Federal exclusion—currently $12 million per person? It depends. The first thing to know: In 2026, the current estate tax laws will sunset, and that $12 million limit will be cut in half to $6 million. More importantly, though, none of us knows how long we will live. And because the estate tax is a political football, there’s no way to know what rules will be in place in the year we happen to die. George Steinbrenner got lucky, but that was more the exception than the rule. So I see estate planning as an important exercise for all high net worth people.
Another reason to take estate tax planning seriously: While the Federal tax is the one most people worry about, don’t forget that many states also levy their own taxes with exclusions that start at much lower levels. In Massachusetts, for example, the estate tax applies to those with just $1 million of assets.
5. Should I contribute to my 401(k) or 403(b)? If you’re in the heart of your working years and in a high tax bracket, it seems like a virtually unquestioned rule to defer taxable income into a retirement account. But is this always the right choice? It depends. The fundamental consideration is whether your tax rate this year will be higher or lower than you expect it to be in retirement. In many—if not most—cases, this is an easy question to answer. Without a salary in retirement, it stands to reason that one’s tax rate will drop considerably. But that’s not true in all cases.
Suppose you have rental properties that generate considerable income. Or maybe you have a traditional pension. Or maybe you’ve taken advantage of additional tax-deferred accounts over the years, such as a cash balance plan, that will result in very substantial required minimum distributions. In all those cases, your tax rate might be just as high in retirement. That’s why, especially as your career advances, it’s important each year to do the math before making further retirement contributions.
6. Should my asset allocation get more conservative as I get older? The answer to this might seem obvious. But there are cases in which it might make sense to increase your allocation to stocks as you get older. Suppose, for example, you have a $5 million portfolio with an asset allocation of 50% in stocks and 50% in bonds. Let’s also suppose that you’re planning to take out $1 million for a summer home in the year you retire. After that, your portfolio probably doesn’t need to be as conservative. Because a significant goal will now be behind you, you might be able to lift your stock allocation to, say, 60%.
Another example: Suppose you retire at 65 but delay Social Security until 70. That’s often a good strategy. But without the benefit of Social Security during those initial years, your portfolio withdrawals will be higher than they’ll be after 70. All things being equal, then, you’d want your portfolio to be positioned more conservatively for the first five years. You could then get more aggressive later, when your withdrawal rate will be lower.