Jonathan Clements's Blog, page 12
August 3, 2025
How I Use a Simple Analogy to Teach Investing
Jonathan Clements, through his decades of work and his recent "Getting Going on Savings Initiative," has inspired countless people—including me—to think about how to empower the next generation. The initiative's core mission is to give young adults a tangible head start by funding their Roth IRAs, a concept that perfectly aligns with the most important lesson I’ve ever learned about money: time is a young adult’s greatest asset.
For many years I've been that person who talks to younger people about saving for retirement and investing for their future. Through family, friends, church youth groups and my younger employees, I've developed a playbook that seems to work more often than not. I'm always thrilled with early success, as the younger someone starts, the better their future investment outcomes tend to be.
I feel an obligation to give advice and build trust with younger generations. Perhaps it's because of my difficult early financial background. I'm not entirely sure, but if you have ever considered giving financial encouragement about retirement planning, my approach might be helpful. My normal first play is based on this question, asked during an informal chat in a relaxed setting:
"What do you think of this? If I had a machine that let you feed in $1 bills and gave you $20 in exchange, would you be excited?" It's a no-brainer, and they might ask how it works. I keep it simple and light-hearted, with no details needed. "It's very simple; there's a magic spell within the machine called the index tracker investing spell." I then follow through with another question:
"What if I told you the machine had a timer and only dispensed the crisp $20 note 40 years later? Would you still be happy to swing by every day and pop a dollar in? It's definitely worth the effort, don't you think? Your $20 will still buy you the equivalent of $5 in this distant future, but hey, it's still a spectacular personal win for your wallet."
This nearly always sparks interest and a conversation about money. The idea is simple and intriguing, and I find it's a good way to capture young adults' imaginations. A common question I get asked is, "Is this real?" I normally fire up an online compound interest calculator and get them to play around with it. Finally, I would chat about setting up the right account to feed the money machine.
I would talk about a Roth IRA and the magic of paying no taxes while the money is inside the machine. The even better point is that when you pull out your dollar bills, now transformed into $20 bills, it's all yours with nothing going to the tax man. At home in the UK I would over time chat about other accounts with different rules and for different goals, unfortunately I'm not familiar enough with your US equivalents to illustrate my point further.
But I think this core principle remains universal: time is a young adult's greatest asset. It's the engine that powers the "magic machine. So my hope is that this simple analogy empowers you to spark these conversations yourself. Take a moment to chat with a young person in your life—a family member, a friend, or an employee—and see if you can light a similar spark of financial curiosity. After all, what better gift can we give than a head start on their future?
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Starting Over, if you can. Some decisions are subject to change (I apologize for its length)
Our journey started in the late 1980s with our first remodel. It was our second marriage, and rather than asking our teenage children to share a bedroom when it was “my weekend”, we created two bedrooms and a full bath on the lower level of our split-level. It was a suite with adjoining bedrooms and a private bath. That brought our bedroom count to six, making room for everyone. We also finished the small “basement” for the boys. We made our first step towards 'aging in place', a concept that involves making home modifications to allow us to live independently and comfortably as we grow older.
Seven years later, as the children grew older and went off to college, it was time to remodel for ourselves. We moved the kitchen to the back of the house, replacing the living and dining rooms. We converted the boys’ bedrooms to twin offices and expanded our master bedroom into the adjoining bedroom. We learned from our parents in wheelchairs that if we expected to age in place, the first floor needed double-wide doorways. The challenge was significant, as it required major structural changes and careful planning to ensure the new layout was both functional and aesthetically pleasing.
The next remodel around 2013 focused primarily on the master bedroom’s closets and bath. Convinced we were aging the place, we added a full bath on the main floor off the kitchen, and finally built our screened-in porch and expanded the deck.
In 2019, the former kitchen, now the den, became my hospital room. We were grateful that we added that full bath next to the new kitchen. About a year later, we cleared out the den for my wife’s recovery from a fall.
We never expected to test the concept of aging in place while we were still in our 70s, but it worked perfectly.
WE CHANGED (Big surprise - life got in the way)
As time passed, we realized we were becoming socially isolated due to mobility issues in our perfectly comfortable single-family home. Our neighbors have either moved or passed away over the last four decades. We missed them, but were happy to see younger families bring the neighbor back to life. This sense of community and connection is something we cherish and strive to maintain.
Having no intention of ever moving, we paid no attention to the new construction of a luxury CCRC just 10 minutes from our home. We finally decided to check it out and immediately added our names to their wait list. We were very late to the party.
Like every other couple, one is reluctant to change, and the other looks forward to it. Time has a way of helping to change minds.
Being late on the list, we missed getting an apartment with a den, an extra room we wanted for our home aide. The apartment we selected has two large bedrooms and a great room that houses the kitchen, living, and dining areas. It's perfect for two, but tight for three. We’re not worried; it should work out to everyone’s satisfaction.
The next issue: The Move. Going into ½ the space means different things to different people. To me, it meant starting over. My wife liked many items and wanted to keep them. We needed a talented interior designer to use every trick to make a small space look spacious and comfortable.
I think I won. Gradually, as we saw the designs, my wife realized it was the right thing to do, especially when I told her it wasn’t costing us a cent. “How’s that?” she asks. I convinced her that, with five children, none would miss their small contribution to our happiness.. The total is big, but divided by five, the resulting amount seems small.
Days are going by quickly. We cleaned out a few areas, but not enough. We have a difference of opinion as to what personal items we want to take. I admit it. I’m attached to my junk (her word, not mine). Then I came up with the perfect plan. She throws away my stuff, and I throw away hers. Problem solved. But it wasn't that simple. Parting with our possessions, even those we rarely used, was an emotional process that required us to reevaluate our attachment to material things and focus on what truly mattered to us.
Simply put, we are moving ‘for community’. By not leaving the area, we get to keep our family and friends. We simplified our move with the help of Erickson Senior Living, which gives new residents a free bridge loan to allow them to sell their homes after moving. It is such a civilized approach for seniors.
So we move in December or January. I hope it goes as planned. We hired a great agent to sell our home (my niece). We hired highly recommended senior moving and transition specialists to handle the details and provide the labor. We can just guide them without doing any physical work. Walking with a cane makes carrying anything a bit difficult.
NEW MISSION (Spread the word)
I am on a new mission with my children. At 55, they are thinking about just one aspect of retirement - the money. What they are not thinking about is housing.
We watched our parents’ health decline, and now we are experiencing ours. We started planning the living portion of our retirement 30 years ago.
It was a great plan until it wasn’t.
WHAT WE LEARNED (This is the important message)
I’ve researched living options for retirees and those needing more than just a physical place to live. I’ve learned one crucial thing. Senior housing supplies are going to be insufficient.
I heard of one place in South Carolina where they have a seven-year wait list for one-bedroom apartments and fourteen years for two. Imagine what that will be like in 10-15 years.
For people like us who don’t care to move to better climates or can no longer play sports or even walk well, we are not moving to faraway places. We want to stay with our family and friends, and, in our case, the same zip code.
The solution is to plan. There is only one way: sign up for waitlists now. Planning is not optional. It's a crucial step that we've learned the importance of, and we encourage others to act on it.
You have to be careful. Some waitlists are better than others - even ideal. For example, our assigned priority number is fixed based on the date. The refundable fee ($1000) is small.. Being on the list early or for a long time means, at some point, you’re in the top, number-one position, ahead of all others because they have made other plans, taken an apartment, or passed on. You can choose active or inactive. If you’re inactive, you will not receive contact when a unit becomes available. If you’re active, you receive a notification every time a unit matching your requirements comes up. Say “no” until you like the offer.
Consider this. You’ll have fewer options if you want to live in a particular place, like near your home or in the same town. It’s getting harder to find land in the most popular areas. For sure, it’s going to be expensive.
In two words, RESERVE NOW. Protect yourselves. It’s inexpensive to add the appropriate housing options to your financial plan.
Check out a Life Plan Community (CCRC). If you think you “might” need what they have to offer, now is the time to go on a wait list.
We have our fingers crossed that we are making the right move.
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August 2, 2025
How to minimize the caregiving burden on our adult children when we need help?
I was reading an article focusing on the caregiving burden on adult children.
Shocking statistics: 63 million Americans — nearly 1 in 4 adults — now provide care to an adult with health or functional needs, or to a child with a serious medical condition or disability — a record high.
Nearly half of caregivers are struggling with finances. More than 20% have taken on more debt, about a third have used up short-term savings, 30% have stopped saving, and roughly 20% are leaving bills unpaid or paying them late, according to the data. Return-to-office requirements are not helping.
More than 60% of caregivers are balancing their caregiving responsibilities while still employed. And half report they reduced hours, have taken unpaid leave, or even quit their job entirely. See link below:
We can minimize the caregiving burden for our children by moving to CCRC or assisted living, providing for long term care, downsizing and relocating closer to them, preparing a robust estate plan, and saving enough to provide for all future expenses. Even if we do these, the stress and emotional toll on children or relatives will still be significant. Many of you have experienced this already.
What should we do to make sure our children do not have to sacrifice so much when we need help due to our deteriorating health? How are your family and friends managing to provide such help to their loved ones?
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ROTH Conversions and Fixed Index Annuities
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Should I Be Concerned?
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August 1, 2025
Worth 1,000 Words
I’ve found that this strategy works well in personal finance, and earlier this year I described some of the images that I rely on most. Below are several more.
1. Back in 2011, an Illinois man named Wayne Sabaj was in his yard when something caught his eye. Upon closer inspection, it turned out to be a package containing a large amount of cash—about $150,000. Sabaj never found out who had buried these funds or why. This sort of thing is not uncommon. Homeowners doing renovations regularly find cash hidden in backyards, basements and bedroom walls.
For me, this is a reminder that many financial decisions are subjective and in the eye of the beholder. To be sure, most people hold their money in the bank, where it’s safe and can earn interest. But not every financial decision has to be strictly optimal. As I often say, there are two answers to every financial question: what the numbers say and how you feel about it. In my view, as long as a financial decision doesn’t carry undue risk, we shouldn’t worry what someone else might think.
2. You may remember the name Keith Gill, or his alter ego, Roaring Kitty. Gill is the day trader who gained fame in 2021 when he helped drive up the share price of the failing retailer GameStop. That, in turn, caused the failure of a multi-billion-dollar hedge fund which had been betting against GameStop. Gill accomplished all of this from his basement in suburban Boston.
This, in my mind, illustrates a growing phenomenon in the market. It’s what hedge fund manager Cliff Asness refers to as the “less efficient market hypothesis.” The internet, and social media in particular, have spawned what he calls “a coordinated clueless and even dangerous mob.” That’s in contrast to the long-held belief that investors should benefit from having more information. This year’s resurgence of so-called meme stocks suggests that Asness may be right. This less-than-rational behavior is another reason to take the long view in investing.
3. Tax rules are complicated and change frequently. But there’s one rule that’s easy to remember, thanks to a hapless fellow named Alvan Bobrow. In 2014, Bobrow, a tax attorney, came to the attention of the IRS when an audit revealed he’d taken advantage of the rules governing IRA rollovers. These rules allow an investor who wants to transfer the balance of a 401(k) or IRA to hold the funds temporarily in his or her checking account—but only for 60 days.
What Bobrow realized, however, was that if he held multiple IRA accounts, he could make continuous use of his IRA dollars by daisy-chaining multiple 60-day rollovers, one after the other, without formally withdrawing the funds, which would have been taxable. Because of the Bobrow case, the IRS clarified the rules. Now, a taxpayer is allowed only one rollover like this per 12-month period. There is, however, no restriction on another type of transfer known as a direct rollover. With this approach, the funds never pass through the investor’s checking account, so you’d never risk running afoul of the rule that tripped up Alvan Bobrow.
4. An incident in 2009 illustrates why diversification is important. A Tel Aviv woman named Anat observed that her elderly mother had been sleeping on the same worn mattress for years. Wanting to do something nice, Anat had a new mattress delivered and put the old one out with the trash. Unfortunately, as Anat later found out, her mother had been holding her entire life’s savings in her mattress—more than $1 million. Anat enlisted a team to search through several landfills for the mattress but without luck. This is an extreme example, but it illustrates why even investments that seem safe can carry risk.
5. Imagine you’re furnishing a new home. Where would you start? For most people, it might be a table and chairs for the dining room or a couch for the living room. I doubt, though, that you would start with something as minor as an umbrella stand. That might seem obvious. Problem is, that’s the way the media tend to talk about investments, focusing on hot stocks, famous fund managers and the like.
What the data say, however, is that it’s much more important to focus on the overall asset allocation of a portfolio. Yes, individual investment choices matter. And sometimes they make all the difference—if you happened to catch a stock like Nvidia, for example. But for most people, most of the time, asset allocation is the primary driver of a portfolio, and that’s where I’d put most of my focus.
6. Should you hold cash in your portfolio? Until interest rates rose a few years ago, that was viewed as suboptimal. Conventional wisdom argued that it made sense to hold only a minimal amount of cash, enough to cover any upcoming withdrawals. But investors’ experience in 2022 illustrates why cash isn’t a bad investment.
When interest rates rose sharply, both stocks and bonds dropped simultaneously—stocks by 18% and bonds by 13%. An investor who held enough cash, or very short-term bonds, to meet withdrawals for that entire year, however, would have been able to avoid selling stocks or bonds when both were down. If you’re thinking about how to structure your portfolio, it’s worth keeping 2022 in mind.
7. In the 1983 movie Trading Places , a key plotline hinges on the annual Florida orange crop. According to the story, it had been a cold winter in Florida. Because of that, the expectation was that the orange harvest would be weak and thus orange prices would move higher. As it turned out, though, the harvest wasn’t any worse than usual—despite the weather—and prices didn’t move higher.
This was just a movie, but this dynamic plays out frequently in investment markets. Investors piece together what looks like a logical story, but for one reason or another, things don’t work out as expected. This is another reason I suggest taking the long view with investments. It’s just too difficult to predict how any given piece of short-term news will affect investment markets.
8. If you’ve ever taken care of toddlers, you know how exhausting it can be. But if they’re both in front of you, and not running around in different directions, it can be a lot easier to keep an eye on them. This illustrates why I recommend building a simple portfolio. If you consolidate your investments into a smaller number of holdings and a smaller number of accounts, that won’t guarantee better investment performance. But it will almost certainly be easier to monitor and to manage.
Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.The post Worth 1,000 Words appeared first on HumbleDollar.
Putting Every Dollar to Work
It got me thinking about what we did right, even though we weren’t consciously working towards any particular goal.
Upon reflection, what we did right:
We took every spare dollar and either paid down debt or invested into broad stock market funds. In early days it was into simple managed funds, in later days into index funds.
Worked really hard and grabbed every opportunity possible.
We had no interest in expensive material items. We bought either used cars or cheap new cars and kept them for a long time. We bought houses well below the local average price.
We were lucky – good health, stable family.
What we didn’t worry about:
Tax minimization - Our accountant would obviously recommend certain steps we should take to reduce our tax and we would follow that advice. But we never sat down and agonized over how to structure our finances based upon tax we might have to pay.
Emergency funds - In Australia it seems pretty common for home mortgages to have a re-draw facility, so any extra payments on our home loan could be withdrawn if we had a significant emergency arise.
Market timing - Dollar cost averaging all the way!
Personal finance can end up really complex. People can agonise over the detail of so many choices.
I’m no expert, just an average guy reflecting on how we got here. My feeling is that simple is better. Map out a strategy that works for you, as simple as possible, and stick to it.
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Putting every dollar to work
Nearing the end of our recent catch-up with our financial adviser, the general discussion turned to how we ended up where we are now. At 59 and 51 respectively, my wife Cindy and I are in a fortunate financial position. We never set out with aims of early retirement, or a target number that we wanted to reach. And despite that, we ended up in good shape.
It got me thinking about what we did right, even though we weren’t consciously working towards any particular goal.
Upon reflection, what we did right:
We took every spare dollar and either paid down debt or invested into broad stock market funds. In early days it was into simple managed funds, in later days into index funds.Worked really hard and grabbed every opportunity possible.We had no interest in expensive material items. We bought either used cars or cheap new cars and kept them for a long time. We bought houses well below the local average price.We were lucky – good health, stable family.What we didn’t worry about:
Tax minimization - Our accountant would obviously recommend certain steps we should take to reduce our tax and we would follow that advice. But we never sat down and agonized over how to structure our finances based upon tax we might have to pay.Emergency funds - In Australia it seems pretty common for home mortgages to have a re-draw facility, so any extra payments on our home loan could be withdrawn if we had a significant emergency arise.Market timing - Dollar cost averaging all the way!Personal finance can end up really complex. People can agonise over the detail of so many choices.
I’m no expert, just an average guy reflecting on how we got here. My feeling is that simple is better. Map out a strategy that works for you, as simple as possible, and stick to it.
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July 31, 2025
My First Retirement Report Card
I'm three months retired today, my goodness the time has flown by!
When I managed my own business I always collated business figures into a quarterly report for better performance monitoring and to help give me a feel for how things were going. I guess the urge to do so is still ingrained within me, and I thought I'd do a similar but more holistic exercise with a first quarter retirement report for the quarter ending 07/31/25.
Key Financial Metrics
Spending vs. Budget: I'm pleased to observe spending has been within anticipated levels, although it has to be noted it's at the upper boundary of projected consumption rates and monitoring is recommended to identify reasons.
Portfolio Performance: We achieved a very strong result, likely placing it in the top quartile for the targeted asset allocation. This was despite portfolio drag due to holding cash in the portfolio for longer than anticipated. This cash holding has now been relocated into stocks.
Withdrawal Rate: The effective portfolio withdrawal rate is 0%. This is in accordance with a first-year planning strategy to use excess cash from a business sale to minimise headspace thinking regarding drawdown in the first year of retirement operations.
Cash Reserves: Emergency and strategic opportunities deposits are fully funded with no ongoing concerns. Reallocation to ongoing best interest rates is a top management focus.
Key Holistic Metrics (wearable activity sensor data)
Step Count: 1,298,000
Jogging: 78 miles
Cycling: 397 miles
These are very pleasing numbers, well above my pre-retirement baseline, and give a strong indication that my extra spare time is being well utilized within a more focused personal health framework.
Social Engagement: Attendance at some large and numerous small social events with friends and family is continuing at a very satisfying level, and no areas of concern have been identified. Social sporting activities help bolster this aspect further, giving a very well-rounded result.
Personal Growth/Learning: A foundation course in planetary science has been identified, and an investigation into enrollment has begun.
Questionable Behaviours: Approximately 40 pints of Guinness were consumed. This is above normal historical levels and needs active monitoring, although mitigating circumstances have been identified around an extended holiday home stay, and consumption is still well within recommended personal levels.
Overall Well-being and Summary
Overall Well-being/Satisfaction Score: 90/100 (subjective but very high and definitely much improved from the pre-retirement level).
So that's my report. I think my first quarter of retirement has been a resounding success, much better than I expected and hoped for. The financial metrics are on track, and more importantly, my personal well-being and health have seen a marked improvement. This is a strong start to the long road ahead, and I'm in an optimistic mood about the future. However, I've been around the block a few times and fully understand that life has a habit of getting in the way of our best-laid plans and hopes. But "best foot forward and keep on going" is my motto!
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Is using a 529 plan a good strategy? Heck, is college worth the expense?
A July 31, 2025 article in the New York Times triggered this post. The headline reads Saving for College Once Felt Essential. Some Parents Are Rethinking Their Plans.
The article is primarily about 529 plans, but also about saving or attending college at all. One comment caught my eye as it questioned the value of college because it didn’t guarantee a good job. I wasn’t aware college ever guaranteed a job or anything else for that matter.
Nonetheless it appears 529 plans are falling out a favor, sometimes replaced by a brokerage account where the parent has access to the funds “if needed.” Now that sounds like a bad idea to me. Not unlike early withdrawals from a 401k.
We began using 529 plans when our first grandchild was born. He will be a sophomore in college this Fall. Our oldest granddaughter starts this fall as well - at the same college by chance.
Each month we contribute $100 to each grandchild’s account and another $100 on birthdays and Christmas. We used to print a “clever” note telling them what we did for their birthday, but stopped the note when one of the younger grandsons said he didn’t want a “coupon” for his birthday. Too bad, the 529 is still his present.
None of our account balances will pay for their college or even one year it appears, but it helps. So far, a portion of our 529 plans are being combined with the parents savings and scholarships to pay the first year. This allows the parents a bit more flexibility with their money and delays taking loans.
I don’t claim the 529 is always the best strategy, but they are easy to establish, they have tax advantages (sometimes tax free at the state level too) and you can set up automatic contributions as well have. Our plan’s investments are adjusted for less risk as the child nears college age.
Qualified education expenses eligible for 529 withdrawal typically include:
Tuition and fees at eligible educational institutions (colleges, universities, vocational schools, etc.).Room and board for students enrolled at least half-time (up to the amount determined by the school for its cost of attendance).Books, supplies, and equipment required for enrollment or attendance.Computers, software, and internet access used for educational purposes.K-12 tuition and fees (up to $10,000 per beneficiary per year).Apprenticeship program expenses (fees, books, supplies, equipment).Student loan payments (up to $10,000 lifetime limit per beneficiary).A 529 can be transferred among family members if necessary. The downside is withdrawals for non-qualified purposes are taxed as ordinary income plus a 10% penalty on earnings (subject to certain exceptions). Within limits, unused funds can now be placed into a Roth IRA for the beneficiary.
Is college necessary, a good investment, does it guarantee success of any kind? Should a basic college education take 4-6 years? We need to rethink the structure of education post high school, and I think some publicly funded education beyond twelve years should be considered, but I’m not ready to give up on college.
It sure is expensive though.
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