Jonathan Clements's Blog, page 15
July 26, 2025
Seeking Input on Medicare Supplement Carriers
After just being hit with an almost 30% premium increase from Mutual of Omaha (MOO), I'm shopping around for a new Medicare Supplement carrier.
I actually like MOO for their generally good customer service, user friendly website, and fast claims processing. Twice in past years, I've been able to stay with MOO but avoid a price hike by switching to one of their sister companies, which I wrote about here.
It seems that option is no longer available, hence my looking into other carriers. I'm fortunate to have good health and should be able to pass medical underwriting.
I've gotten somewhat lower quotes from Humana and Cigna. I've gotten substantially lower quotes from two less familiar names: Banker's Fidelity (part of Atlantic Capital Life Assurance Co.) and Wellabe (formerly Medico).
I'd appreciate a post from anyone who's had experience with any of these companies, including their recent history of premium increases, customer service, website user friendliness, and claims processing. I'm particularly interested in hearing about Wellabe/Medico.
Thanks!
I actually like MOO for their generally good customer service, user friendly website, and fast claims processing. Twice in past years, I've been able to stay with MOO but avoid a price hike by switching to one of their sister companies, which I wrote about here.
It seems that option is no longer available, hence my looking into other carriers. I'm fortunate to have good health and should be able to pass medical underwriting.
I've gotten somewhat lower quotes from Humana and Cigna. I've gotten substantially lower quotes from two less familiar names: Banker's Fidelity (part of Atlantic Capital Life Assurance Co.) and Wellabe (formerly Medico).
I'd appreciate a post from anyone who's had experience with any of these companies, including their recent history of premium increases, customer service, website user friendliness, and claims processing. I'm particularly interested in hearing about Wellabe/Medico.
Thanks!
The post Seeking Input on Medicare Supplement Carriers appeared first on HumbleDollar.
July 25, 2025
Going to Extremes
STOCK MARKET Investing requires a near superhuman ability to withstand pain. That’s the conclusion of a recent report by investment researcher Michael Mauboussin.
Mauboussin surveyed all stocks trading on U.S. exchanges over a 40-year period, between 1985 and 2024. He found that the median stock experienced a decline of 85% at one point or another. Worse yet, more than half of these stocks never fully recouped their losses. The median stock recovered to just 90% of its prior high-water mark. Among those stocks that were able to reclaim their prior highs, it was a long process—about five years, on average. This would have tried any investor’s patience.
Those numbers only apply to the median stock, but suppose you had above-average stock-picking skills. How would things have turned out? If you had the foresight to pick the 20 best performing stocks over that 40-year period, they still would have delivered an agonizing drawdown of 72%, on average.
It’s hard to remember, but Apple dropped 83% at one point. Nike once lost 66%. Even Nvidia, which was the best performing stock over the past 20 years through 2024, lost more than 90% at one point. And most notably, Amazon was once down 95% from its prior high.
It’s known that the stock market is unpredictable, but these numbers provide additional insight into the market’s dynamics.
In general, the stock market is rational. Over the long term, share prices do move in tandem with corporate profits. When a company’s earnings increase, often its share price does too. The problem is that prices are only sometimes rational. Very often, stock prices disconnect from corporate earnings, and the gap can be significant. This was first proven empirically in the 1970s by Daniel Kahneman and his longtime collaborator, Amos Tversky.
In 1974, they published a paper titled “Judgment under Uncertainty: Heuristics and Biases.” It was one of the first papers in the nascent field of behavioral finance, and what they found was that investors exhibit an “availability heuristic.” That is, they tend to rely on the information that is most available. That’s a problem because the information that happens to be most available isn’t necessarily the information that’s the most accurate or even relevant. Often, the information that happens to come to mind is, as Kahneman and Tversky put it, the information that’s most vivid. In other words, extreme information or news becomes most memorable, and thus drives decision-making.
Later research built on this idea. In the mid-1980s, economists Werner De Bondt and Richard Thaler published a paper titled “Does the Stock Market Overreact?” They found that share prices definitely do overreact. A casual observer might find that conclusion intuitive, but De Bondt and Thaler were able to prove and quantify it. They looked at stocks that had either outperformed or underperformed by a significant margin in recent years, then examined their performance over subsequent years.
They found that stocks exhibiting extreme performance tended to reverse course. Strong performers lagged, and weak stocks often outperformed. The implication: Investors systematically overreact to news, driving stocks too far in one direction or the other.
It’s for these reasons Warren Buffett scolded investors for their short-term thinking. During the market slump earlier this year, Buffett commented, “If it makes a difference to you whether your stocks are down 15% or not, you need to get a somewhat different investment philosophy,” adding that, “People have emotions, but you got to check them at the door when you invest.”
On this point, Buffett’s late partner, Charlie Munger, was more blunt. “If you're not willing to react with equanimity to a market price decline of 50% two or three times a century,” Munger said, “you’re not fit to be a common shareholder.…”
In making these comments, Buffett and Munger weren’t being preachy; they knew from decades of experience what De Bondt and Thaler's research concluded—that the market is often irrational, and it can irrationally punish even the best of companies’ stocks. About 10 years ago, Buffett noted that Berkshire Hathaway—his own company—had seen its stock drop 50% on three separate occasions. “Someday, something close to this kind of drop will happen again, and no one knows when,” he added.
What complicates the equation is that the stock market sometimes makes an extreme move that’s justified and not the product of emotional overreaction. In January, for example, when Nvidia shares dropped 17% in a single day, it was in response to a potentially serious competitive threat. Similarly, Apple shares are down about 14% this year in response to some real concerns, including slowing iPhone sales, a weak position in AI and the impact of tariffs. Similarly, Alphabet—parent company of Google—has seen its stock underperform this year as AI tools like ChatGPT chip away at its market share.
Of course, no one knows where any of these stocks will go next. Whether it’s in response to tangible news, emotional overreaction, or some combination of the two, stock price movements will always be unpredictable. That’s a reality, but there is a way to mitigate it.
As noted earlier, Mauboussin found that the median stock suffered a drawdown of 85%, and even the best stocks saw a drawdown of 72%. But the S&P 500, a broad market index, never experienced a drop of that magnitude during the time period studied. The worst drop experienced by the S&P was 58%—terrible but far less bad than the experience of those individual stocks. I believe this is a key reason to avoid picking stocks and instead to invest using index funds.
In addition to managing risk, index funds offer another powerful benefit. As noted earlier, the median stock in Mauboussin’s study never fully recovered after experiencing a decline. But on average, stocks definitely do recover and significantly surpass their prior high-water marks. On average, stocks gained nearly 340% when they bounced back.
Why the distinction between the median and the average? It’s a technical point but an important one. The results for the median stock are unaffected by the performance of outliers. But outliers are the main driver of the market’s overall return. When a stock like Nvidia gains 86,000%, as it has over the past 20 years, that pulls up the average. While an investor who was exceptionally forward-looking, bordering on clairvoyant, might have purchased Nvidia shares—and held onto them—over the past 20 years, most wouldn’t have been that fortunate. Over the years, however, the S&P 500 has owned Nvidia, along with Apple, Amazon and the market’s other big gainers, helping the index to notch healthy gains.
The bottom line: Picking stocks can be entertaining. But according to the data, it’s not the most reliable way to build wealth. What’s the best way? Index funds. Why? They cast a wide net and are unaffected by emotion, allowing investors to benefit from the growth of exceptional stocks while simultaneously limiting the impact of drawdowns.
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.
Mauboussin surveyed all stocks trading on U.S. exchanges over a 40-year period, between 1985 and 2024. He found that the median stock experienced a decline of 85% at one point or another. Worse yet, more than half of these stocks never fully recouped their losses. The median stock recovered to just 90% of its prior high-water mark. Among those stocks that were able to reclaim their prior highs, it was a long process—about five years, on average. This would have tried any investor’s patience.
Those numbers only apply to the median stock, but suppose you had above-average stock-picking skills. How would things have turned out? If you had the foresight to pick the 20 best performing stocks over that 40-year period, they still would have delivered an agonizing drawdown of 72%, on average.
It’s hard to remember, but Apple dropped 83% at one point. Nike once lost 66%. Even Nvidia, which was the best performing stock over the past 20 years through 2024, lost more than 90% at one point. And most notably, Amazon was once down 95% from its prior high.
It’s known that the stock market is unpredictable, but these numbers provide additional insight into the market’s dynamics.
In general, the stock market is rational. Over the long term, share prices do move in tandem with corporate profits. When a company’s earnings increase, often its share price does too. The problem is that prices are only sometimes rational. Very often, stock prices disconnect from corporate earnings, and the gap can be significant. This was first proven empirically in the 1970s by Daniel Kahneman and his longtime collaborator, Amos Tversky.
In 1974, they published a paper titled “Judgment under Uncertainty: Heuristics and Biases.” It was one of the first papers in the nascent field of behavioral finance, and what they found was that investors exhibit an “availability heuristic.” That is, they tend to rely on the information that is most available. That’s a problem because the information that happens to be most available isn’t necessarily the information that’s the most accurate or even relevant. Often, the information that happens to come to mind is, as Kahneman and Tversky put it, the information that’s most vivid. In other words, extreme information or news becomes most memorable, and thus drives decision-making.
Later research built on this idea. In the mid-1980s, economists Werner De Bondt and Richard Thaler published a paper titled “Does the Stock Market Overreact?” They found that share prices definitely do overreact. A casual observer might find that conclusion intuitive, but De Bondt and Thaler were able to prove and quantify it. They looked at stocks that had either outperformed or underperformed by a significant margin in recent years, then examined their performance over subsequent years.
They found that stocks exhibiting extreme performance tended to reverse course. Strong performers lagged, and weak stocks often outperformed. The implication: Investors systematically overreact to news, driving stocks too far in one direction or the other.
It’s for these reasons Warren Buffett scolded investors for their short-term thinking. During the market slump earlier this year, Buffett commented, “If it makes a difference to you whether your stocks are down 15% or not, you need to get a somewhat different investment philosophy,” adding that, “People have emotions, but you got to check them at the door when you invest.”
On this point, Buffett’s late partner, Charlie Munger, was more blunt. “If you're not willing to react with equanimity to a market price decline of 50% two or three times a century,” Munger said, “you’re not fit to be a common shareholder.…”
In making these comments, Buffett and Munger weren’t being preachy; they knew from decades of experience what De Bondt and Thaler's research concluded—that the market is often irrational, and it can irrationally punish even the best of companies’ stocks. About 10 years ago, Buffett noted that Berkshire Hathaway—his own company—had seen its stock drop 50% on three separate occasions. “Someday, something close to this kind of drop will happen again, and no one knows when,” he added.
What complicates the equation is that the stock market sometimes makes an extreme move that’s justified and not the product of emotional overreaction. In January, for example, when Nvidia shares dropped 17% in a single day, it was in response to a potentially serious competitive threat. Similarly, Apple shares are down about 14% this year in response to some real concerns, including slowing iPhone sales, a weak position in AI and the impact of tariffs. Similarly, Alphabet—parent company of Google—has seen its stock underperform this year as AI tools like ChatGPT chip away at its market share.
Of course, no one knows where any of these stocks will go next. Whether it’s in response to tangible news, emotional overreaction, or some combination of the two, stock price movements will always be unpredictable. That’s a reality, but there is a way to mitigate it.
As noted earlier, Mauboussin found that the median stock suffered a drawdown of 85%, and even the best stocks saw a drawdown of 72%. But the S&P 500, a broad market index, never experienced a drop of that magnitude during the time period studied. The worst drop experienced by the S&P was 58%—terrible but far less bad than the experience of those individual stocks. I believe this is a key reason to avoid picking stocks and instead to invest using index funds.
In addition to managing risk, index funds offer another powerful benefit. As noted earlier, the median stock in Mauboussin’s study never fully recovered after experiencing a decline. But on average, stocks definitely do recover and significantly surpass their prior high-water marks. On average, stocks gained nearly 340% when they bounced back.
Why the distinction between the median and the average? It’s a technical point but an important one. The results for the median stock are unaffected by the performance of outliers. But outliers are the main driver of the market’s overall return. When a stock like Nvidia gains 86,000%, as it has over the past 20 years, that pulls up the average. While an investor who was exceptionally forward-looking, bordering on clairvoyant, might have purchased Nvidia shares—and held onto them—over the past 20 years, most wouldn’t have been that fortunate. Over the years, however, the S&P 500 has owned Nvidia, along with Apple, Amazon and the market’s other big gainers, helping the index to notch healthy gains.
The bottom line: Picking stocks can be entertaining. But according to the data, it’s not the most reliable way to build wealth. What’s the best way? Index funds. Why? They cast a wide net and are unaffected by emotion, allowing investors to benefit from the growth of exceptional stocks while simultaneously limiting the impact of drawdowns.
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 Going to Extremes appeared first on HumbleDollar.
Raising Dough
The best financial advice I know is “live on less than you earn and save the difference.” But what if there’s no daylight between what you earn and what you spend?
Many of us confront this problem because of four scary expenses: housing, healthcare, student loans and child care. Take housing alone. By my calculations, it would take a six-figure income to buy a $435,300 home, which is the median cost of a U.S. home today according to the National Association of Realtors.* The median U.S. household comes up well short of this, with $78,171 in 2025.
With challenges like these, it’s time to add a new chapter to the financial planning textbook—how to make more money. What would you include in a “make money” playbook? I’ll pitch my ideas, but it honestly feels like I’m stating the obvious. You may have better ideas from your life. Please add them in comments—I look forward to reading them.
Here are my thoughts:
If you’re still in school, know what your college major pays before you—or your child—graduates. You can look up the average first-year earnings of many majors at specific colleges here. It’s a goldmine of nuggets like this: At Purdue, graduates in biology earn $33,500 a year, on average, versus $69,200 for mechanical engineers.
If you’re already in the workforce, continue your education by earning a professional designation or advanced degree. This makes you a trusted authority with your employer. Extra credit: Many employers, like mine, will pay the freight on a job-related degree.
Job hop for a big pay bump. I wrote about this once during the pandemic, when job seekers had the upper hand in salary negotiations. That may not be true now, except in specialty fields like AI. Back then, one commenter said that changing employers seemed disloyal. If you agree, seek out promotions with your current employer.
Teach what you know. Nearly half of all college faculty are adjuncts these days. The pay is only so-so in my experience, but it helps to organize your knowledge. Besides, you’ll be seen as a leader in your field.
The world of side hustles is enormous. I’ve done freelance work and found it slightly rewarding, but every dollar counted at that moment. I’ve made more by renting out an extra house that came with my farm property. If you go the side-hustle route, just try not to wear out your car delivering passengers or pizza.
I have a second category of suggestions related to cutting expenses. No, I don’t mean draining the fun out of life, say, by never eating out. These ideas won’t diminish your quality of life but might save you tons of money:
Unless you’re a gearhead, buy a used car and run it for many years. You may save tens of thousands on each car purchase without sacrificing mobility. When repairs get to be a hassle, buy another used car with the savings you’ve stacked away. You don’t have to own a clunker. I’ve been driving Volvos.
Pay your credit card in full every month. Use the card as much as you like, as long as you never carry a balance. My card pays me 2% cash back, but you may prefer airline miles.
Reframe the college decision by refusing to borrow more than one year of future pay in the student’s field. For example, a nursing student at the University of Connecticut wouldn’t borrow more than $69,400—the average pay nursing graduates receive. Can’t be done? Ask for more aid or try another school.
Stay organized and on top of your finances. I’ve paid a penalty for paying bills late or carrying unwanted subscriptions. Sigh. Your bank, your credit card, even your local parking authority would love to dun you with mindless charges. Try not to let them.
I hope this helps someone. Now, what are your ideas?
*I assumed a 20% down payment and a 7% mortgage rate and kept the monthly payments at 30% of total income. Those who spend a higher percentage of their income on housing are deemed “cost-burdened” by the U.S. Census Bureau, but many are stuck there.
Many of us confront this problem because of four scary expenses: housing, healthcare, student loans and child care. Take housing alone. By my calculations, it would take a six-figure income to buy a $435,300 home, which is the median cost of a U.S. home today according to the National Association of Realtors.* The median U.S. household comes up well short of this, with $78,171 in 2025.
With challenges like these, it’s time to add a new chapter to the financial planning textbook—how to make more money. What would you include in a “make money” playbook? I’ll pitch my ideas, but it honestly feels like I’m stating the obvious. You may have better ideas from your life. Please add them in comments—I look forward to reading them.
Here are my thoughts:
If you’re still in school, know what your college major pays before you—or your child—graduates. You can look up the average first-year earnings of many majors at specific colleges here. It’s a goldmine of nuggets like this: At Purdue, graduates in biology earn $33,500 a year, on average, versus $69,200 for mechanical engineers.
If you’re already in the workforce, continue your education by earning a professional designation or advanced degree. This makes you a trusted authority with your employer. Extra credit: Many employers, like mine, will pay the freight on a job-related degree.
Job hop for a big pay bump. I wrote about this once during the pandemic, when job seekers had the upper hand in salary negotiations. That may not be true now, except in specialty fields like AI. Back then, one commenter said that changing employers seemed disloyal. If you agree, seek out promotions with your current employer.
Teach what you know. Nearly half of all college faculty are adjuncts these days. The pay is only so-so in my experience, but it helps to organize your knowledge. Besides, you’ll be seen as a leader in your field.
The world of side hustles is enormous. I’ve done freelance work and found it slightly rewarding, but every dollar counted at that moment. I’ve made more by renting out an extra house that came with my farm property. If you go the side-hustle route, just try not to wear out your car delivering passengers or pizza.
I have a second category of suggestions related to cutting expenses. No, I don’t mean draining the fun out of life, say, by never eating out. These ideas won’t diminish your quality of life but might save you tons of money:
Unless you’re a gearhead, buy a used car and run it for many years. You may save tens of thousands on each car purchase without sacrificing mobility. When repairs get to be a hassle, buy another used car with the savings you’ve stacked away. You don’t have to own a clunker. I’ve been driving Volvos.
Pay your credit card in full every month. Use the card as much as you like, as long as you never carry a balance. My card pays me 2% cash back, but you may prefer airline miles.
Reframe the college decision by refusing to borrow more than one year of future pay in the student’s field. For example, a nursing student at the University of Connecticut wouldn’t borrow more than $69,400—the average pay nursing graduates receive. Can’t be done? Ask for more aid or try another school.
Stay organized and on top of your finances. I’ve paid a penalty for paying bills late or carrying unwanted subscriptions. Sigh. Your bank, your credit card, even your local parking authority would love to dun you with mindless charges. Try not to let them.
I hope this helps someone. Now, what are your ideas?
*I assumed a 20% down payment and a 7% mortgage rate and kept the monthly payments at 30% of total income. Those who spend a higher percentage of their income on housing are deemed “cost-burdened” by the U.S. Census Bureau, but many are stuck there.
The post Raising Dough appeared first on HumbleDollar.
Pedaling Away From Tightness
Yesterday evening, I decided to test out my brand-new, shiny bike. Around half an hour later, I was standing bemused, looking down the 20% gradient hill path I'd just cycled up. I was just a bit out of breath, and if you know anything about cycling and gradients, you must be thinking I'm talking rubbish. That steep slope should literally be a wall of unendurable pain, and on my normal bike, I wouldn't even have attempted to go near it. How could I have possibly done this extreme feat? Very simple: my shiny new purchase is an e-bike, and what a revelation it's been.
I love cycling and probably ride around 1,000 miles per year on my normal bike. But I have to tell you, it's a challenge at my holiday home because there's a lot of hilly terrain to conquer. My dream of biking the wonderful coastal routes around my home over this summer was in serious jeopardy of not happening, or being curtailed to the easier routes.
I'm normally a very generous person, but when it comes to personal spending on myself, it's another story entirely. Tight is the word that comes to mind, and adding extremely to the beginning of that wouldn't be a stretch of the imagination. But after weeks of indecision and hours of looking, I eventually cracked open the wallet and spent a bit of cash on myself, much to the very large sigh of relief from my wife, Suzie, because I'd talked her ears off about my buying dilemma.
So on the face of it this hasn't a lot to do with finance and retirement, and in truth it doesn't. I just wanted to tell people what a great thing this e-bike is, but if I dig down a bit deeper, there are some lessons to learn. My gift to myself is a great enabling device that lets me continue doing something I enjoy. It definitely benefits my mental health and well-being, a great plus at any stage, but particularly as we age. It can also be looked at as an investment in preventive care, encouraging me to exercise and improve my physical health, and that's definitely going to pay dividends for my future self.
Then there's the experiential spending over purely material possessions. Instead of buying more "stuff," I've invested in something that directly enhances my quality of life and allows me to continue a passion. This kind of investment in experiences can provide greater long-term satisfaction and contributes more to overall well-being, which is crucial for a fulfilling retirement.
But deep down, I think I'm just trying to overcome and justify a reluctance to spend on myself. And if we think about it, that's another issue many need to overcome in retirement. Finding a reason that has meaning for you might make this transition to personal spending easier. Find your passion and give yourself permission. And you just never know. Maybe a super cool e-bike might help you come to terms with this problem, even if, like me, you just happen to have two perfectly fine bikes already!
I love cycling and probably ride around 1,000 miles per year on my normal bike. But I have to tell you, it's a challenge at my holiday home because there's a lot of hilly terrain to conquer. My dream of biking the wonderful coastal routes around my home over this summer was in serious jeopardy of not happening, or being curtailed to the easier routes.
I'm normally a very generous person, but when it comes to personal spending on myself, it's another story entirely. Tight is the word that comes to mind, and adding extremely to the beginning of that wouldn't be a stretch of the imagination. But after weeks of indecision and hours of looking, I eventually cracked open the wallet and spent a bit of cash on myself, much to the very large sigh of relief from my wife, Suzie, because I'd talked her ears off about my buying dilemma.
So on the face of it this hasn't a lot to do with finance and retirement, and in truth it doesn't. I just wanted to tell people what a great thing this e-bike is, but if I dig down a bit deeper, there are some lessons to learn. My gift to myself is a great enabling device that lets me continue doing something I enjoy. It definitely benefits my mental health and well-being, a great plus at any stage, but particularly as we age. It can also be looked at as an investment in preventive care, encouraging me to exercise and improve my physical health, and that's definitely going to pay dividends for my future self.
Then there's the experiential spending over purely material possessions. Instead of buying more "stuff," I've invested in something that directly enhances my quality of life and allows me to continue a passion. This kind of investment in experiences can provide greater long-term satisfaction and contributes more to overall well-being, which is crucial for a fulfilling retirement.
But deep down, I think I'm just trying to overcome and justify a reluctance to spend on myself. And if we think about it, that's another issue many need to overcome in retirement. Finding a reason that has meaning for you might make this transition to personal spending easier. Find your passion and give yourself permission. And you just never know. Maybe a super cool e-bike might help you come to terms with this problem, even if, like me, you just happen to have two perfectly fine bikes already!
The post Pedaling Away From Tightness appeared first on HumbleDollar.
Letting Go
Most of us like to be in control. I certainly do. But what about controlling how our heirs use the money we bequeath?
That’s a question I’ve had to face. I’m hoping both of my 30-something children will use my bequest to bolster their long-term financial future, adding the money to their portfolio and perhaps using a portion to buy new homes.
Both have good financial habits, and the money they’ll receive could—if used sensibly—mean they’ll be far wealthier in their 60s than I am. But, of course, there are no guarantees. Perhaps their spouses will argue for using the money in other ways. Perhaps they’ll commit some major financial blunder. Perhaps the money will make them the target of some scam.
Meanwhile, because I’m remarried, I could have used a trust arrangement to leave money to my wife Elaine, and then have what remains pass to my two children upon her death. But I didn’t go that route. Instead, I’ve asked Elaine to leave at least part of what I give her to the kids. She’s promised she will, and I totally trust that she’ll do so. But I can also imagine scenarios where it won’t happen. What if she gets hit with, say, huge long-term-care expenses?
As the joke goes, it’s tough to make predictions, especially about the future. But that’s also why I’m not inclined to bequeath the money with any strings attached. Besides the cost of complicated trust arrangements, what if Elaine or my two kids get hit with a large and urgent financial need? I’d rather not tie their hands.
I’ve told Elaine and the kids what they can expect from my estate. I’ve made it clear I don’t want any quibbling over my will, my beneficiary designations, the division of my possessions and my funeral arrangements. As detailed in the recent posts from Dana Ferris and Marjorie Kondrack, as well as the comments those posts triggered, such fights can cause hefty emotional damage, and I’d be appalled if anything like that happened after my death. But I also believe the best course of action is to clearly express my wishes, and then trust that they'll be respected.
That’s a question I’ve had to face. I’m hoping both of my 30-something children will use my bequest to bolster their long-term financial future, adding the money to their portfolio and perhaps using a portion to buy new homes.
Both have good financial habits, and the money they’ll receive could—if used sensibly—mean they’ll be far wealthier in their 60s than I am. But, of course, there are no guarantees. Perhaps their spouses will argue for using the money in other ways. Perhaps they’ll commit some major financial blunder. Perhaps the money will make them the target of some scam.
Meanwhile, because I’m remarried, I could have used a trust arrangement to leave money to my wife Elaine, and then have what remains pass to my two children upon her death. But I didn’t go that route. Instead, I’ve asked Elaine to leave at least part of what I give her to the kids. She’s promised she will, and I totally trust that she’ll do so. But I can also imagine scenarios where it won’t happen. What if she gets hit with, say, huge long-term-care expenses?
As the joke goes, it’s tough to make predictions, especially about the future. But that’s also why I’m not inclined to bequeath the money with any strings attached. Besides the cost of complicated trust arrangements, what if Elaine or my two kids get hit with a large and urgent financial need? I’d rather not tie their hands.
I’ve told Elaine and the kids what they can expect from my estate. I’ve made it clear I don’t want any quibbling over my will, my beneficiary designations, the division of my possessions and my funeral arrangements. As detailed in the recent posts from Dana Ferris and Marjorie Kondrack, as well as the comments those posts triggered, such fights can cause hefty emotional damage, and I’d be appalled if anything like that happened after my death. But I also believe the best course of action is to clearly express my wishes, and then trust that they'll be respected.
The post Letting Go appeared first on HumbleDollar.
July 24, 2025
Has anyone used iBonds to build a bond ladder?
Has anyone used iShares Target Date iBond ETFs to build their bond ladder? If so, I’d love to know your experience as I start to consider my own ladder.
Here is how iShares describes this product: "iBonds exchange-traded funds (“ETFs”) are an innovative suite of bond funds that hold a diversified portfolio of bonds with similar maturity dates. Each ETF provides regular interest payments and distributes a final payout in its stated maturity year, similar to traditional bond laddering strategies. However, the funds’ unique structure is designed to help investors easily build bond ladders with only a handful of funds."
The expense ratios on the iBond Target Date Maturity ETFs range from 7 basis points for U.S. Treasuries; 10 bps for TIPS, Municipals, & Investment Grade Corporate; and 35 bps for the “High Yield & Income Corporate” ETF.
7 – 10 bps seems extremely reasonable for the increased diversification and professional purchasing/management of iBonds. Anyone care to comment?
Here is how iShares describes this product: "iBonds exchange-traded funds (“ETFs”) are an innovative suite of bond funds that hold a diversified portfolio of bonds with similar maturity dates. Each ETF provides regular interest payments and distributes a final payout in its stated maturity year, similar to traditional bond laddering strategies. However, the funds’ unique structure is designed to help investors easily build bond ladders with only a handful of funds."
The expense ratios on the iBond Target Date Maturity ETFs range from 7 basis points for U.S. Treasuries; 10 bps for TIPS, Municipals, & Investment Grade Corporate; and 35 bps for the “High Yield & Income Corporate” ETF.
7 – 10 bps seems extremely reasonable for the increased diversification and professional purchasing/management of iBonds. Anyone care to comment?
The post Has anyone used iBonds to build a bond ladder? appeared first on HumbleDollar.
Selling Your House and Reaping Tax Free Capital Gains May be in Jeopardy
The National Association of Realtors forecasts that by 2035, close to 70% of homeowners might have gains exceeding $250,000 and 38% of them will have more than $500,000.
Per AI
I just read an article in which it was reported that in comments to the press on Tuesday the President suggested he is considering eliminating capital gains taxes on the sale of homes.
The article reviews the rules to claim this benefit which is definitely in the near(er) future for Humble Dollar readers
If you have lived in it as your primary residence for at least 24 months (consecutively or not) in the previous five years before you sell it, you may be allowed to exempt from the capital gains tax the first $250,000 of your gains if you’re single or $500,000 if you’re married filing jointly. The capital gains exemption thresholds have not adjusted for inflation since they were set in 1997.
In 2025, filers will owe 0% in capital gains tax for gains above the exemption threshold if their taxable income is below $48,350 (or $96,700 if married filing jointly), according to the IRS.
They will owe 15% if their income is between $48,450 and $533,400 (or between $96,700 and $600,050 for joint filers). And any filer with income above those levels will pay a 20% capital gains rate.
To be able to claim the full exemption for couples after death of a spouse:
You must sell the home within two years
You must not have remarried at the time of the sale.
Neither you nor your late spouse can have taken the exclusion on another home sold less than two years before the current home sale.
You must meet the 2-year ownership and residence requirements. This includes your late spouse's ownership and residence time, if applicable.
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The Bond Fund Crash: What I Learned When “Safe” Investments Tanked
An article yesterday by David Lancaster detailing his bond fund investments going pear-shaped during the 2022/23 bond market crash got me thinking about what I have actually learned from this costly experience that took many of us by surprise.
Like David, I perceived bond funds as a "safe" or "stable" investment, assuming they behaved like individual bonds held to maturity. The recent downturn, however, exposed my lack of understanding. When rates rose rapidly, the market value of the bonds within the funds dropped. Since bond funds are perpetual and do not "mature" to par, investors saw the value of their fund shares decline.
My key takeaway was my lack of personal education. This, in my opinion, underscores the importance of understanding the precise mechanisms of any investment product, not just its broad asset class, to really grasp its risks and potential behavior in different market conditions. I failed with this and paid the price. Unfortunately, it was a costly lesson learned, but if nothing else, I have now had a practical demonstration of why I need to understand what I invest my money in.
My second takeaway: buying individual bonds in a bond ladder and holding to maturity is an effective strategy to navigate this risk. Holding an individual bond to maturity ensures you receive your original principal back. Daily price fluctuations become irrelevant if you do not intend to sell. Unlike my previous bond funds, which continuously rebalanced and reflected current market values, holding individual bonds isolates me from market volatility for that specific bond. I concede this will work better for short to medium term time frames and this is how I will be using them.
While buying individual bonds has definitely required more effort on my part, they offer me predictability and principal return at a defined date. That is a stark contrast to the bond funds in my portfolio during the recent downturn. My "buy and hold" approach to individual bonds has given me a path through interest rate turbulence, although inflation risk is still an issue. As a side note, there's a fantastic online tool for building UK government bond ladders. I don't think I would have managed without it.
Quite possibly over the coming years other nasty investment surprises will rear their ugly heads. My hope is I am now in a better position to insulate myself from these "unknown unknowns" by only investing in things that I clearly understand. I think this philosophy can be extended to other asset classes whether it's equities, real estate, commodities, or alternative investments. I definitely intend to double down on my education and hope for the best.
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July 23, 2025
The Boy Who Couldn’t Risk
I prepared this article as "homework" for a personal finance elective at a college-preparatory high school I might be contributing to in the Fall. Perhaps it would be helpful to parents whose kids are smitten with the Magnificent 7 or crypto.
After a stock market decline, people may perceive more risk than before, when the decline may have taken some of the risk out of the market.
---Robert Shiller
The investor’s chief problem—and even his worst enemy---is himself.
---Benjamin Graham
Patty wants to go to the prom with Danny. But with barely two weeks left before the affair, Peter asks her out. Does Patty accept Peter’s invitation or does she wait for her first choice to come through? Play it safe or go for it.
Steve is struggling with a different kind of dilemma. He knows Samantha would accept a date in a heartbeat, but the prom is the last chance for him to have a date with Maria, the exotic transfer student from Brazil. Does Steve choose his good friend or roll the dice with a secret flame?
You Can’t Escape Risk
How much risk can you take without becoming a little anxious? Are you a high or low risk-taker? Could you skip much of chapter 5 because the War of 1812 is so-o-o boring? Samantha doesn’t bother to go over her lecture notes for the final because on the midterm old man Hendrickson only tested on the readings. What about Steve? He reviews everything so as not to be blindsided.
Taking risk doesn’t end with becoming a high school senior. Do you apply to more than one safety school or enroll in calculus to compensate for your low math SAT score. Then, it’ll be making a traditional family or not, and charting a safe or more challenging career. Each stage of life comes with its own bundle of risks and associated anxieties. Nobody gets a free pass.
Investment Risk Tolerance
Success in the stock market partly hinges on knowing your risk tolerance and how it influences your investing behavior. Let’s say your portfolio has lost 20% in the past two months, a rare but not impossible occurrence. Do you buy more stocks at a good price, stand pat or exit in a panic?
What happened to the market? It wasn’t just the market—you were holding too many high-flying technology stocks like Palo Alto Networks and media stocks like Netflix. If you had sprinkled in a goodly number of established companies’ more stable stocks like Coke or Kraft Heinz, you might have lost 10% instead of 20%.
But if after several months high-octane stocks fully recovered from the selloff, you would only recoup only that 10% rather than 20%. Could you handle a treacherous ride to perhaps score really big bucks or are you more comfortable with a smoother, less harrowing experience? Samantha, the test-taking acrobat, might be enveloped in self-criticism if she missed most of the rebound.
What about Steve, the guy who couldn’t make up his mind over the steadfast Samantha or beauteous Maria? He was lucky, a factor which frequently masquerades as investment savvy. His indecision led to doing nothing, which ironically kept him in for the rally. Are you a quick-thinking Samantha or a reluctant Steve? Know thyself and get comfy with your risk tolerance before you take your first plunge.
Let’s look at the four major types of risk. These entail the market itself, interest rates, inflation and unpredictable events.
Market Risk
We’ve just gotten a glimpse of market risk. Although bull markets that ramp up stock prices are more common than bear markets that drive them down, timing the peaks and valleys of the cycle has eluded even the most renowned of market seers. If you take a plunge when stocks are approaching the top, you will be vulnerable in the near-term. That’s why most market observers recommend you stay in the market for at least three years, so you will have time to regain any losses.
Interest Rate Risk
Stock prices are very sensitive to changes in interest rates. The mortgage rate determines the cost of the loan homebuyers must pay back to the bank along with the principal amount. Today that rate is 7%, about the historical average. Lower rates translate into more home buying since more people could afford a mortgage loan, spurring sales of household products like appliances and furniture. Lower interest cost also stimulates business activity as more firms are able to pay for inventory and expansion. Higher interest rates contract business and real estate transactions, dampening the outlook for the economy and stocks.
Inflation Risk
But every so often when times are good and people have more money in their pocket, competition for goods and services drives up prices to unaffordable levels. The government may raise interest rates to tamp down the overheated economy, eventually lowering prices to where people can cover their living expenses and companies can initiate projects. In the meantime, the slowdown in activity usually hurts stock prices.
Event Risk
Additional investment risks originate from outside the financial markets and cannot be prevented by the unsuspecting investor. Both of the two major risks of this kind are considered event-related. A common such occurrence is a sudden development that threatens to decrease the company’s sales and lower profits. This sometimes happens when the operations of a fast-food restaurant like McDonald’s or Chipotle are interrupted by a health scare. More calamitous were the two crashes involving Boeing’s vaunted 737 MAX 8 airliner in 2018 and 2019. Although the stocks of companies impacted by tainted food usually recover once the problem is resolved, Boeing’s reputation and production have never returned to their pre-crash levels. Today, the stock sits at less than half of what it was then.
The second kind of external shock to stock prices is sometimes referred to as a “black swan.” A poignant example was the Covid pandemic. It kept people at home, devastated businesses and ushered in the bear market of 2022, when stocks lost 18%.
Risk Tolerance vs. Risk Capacity
Risk tolerance is very different from risk capacity. The first is a relatively stable personality trait, whereas your capacity to withstand risk changes over time as your life situations and financial needs change. If you’re planning to buy a home and anticipating a high monthly mortgage payment, your ability to absorb a market reversal will be reduced. To be sure, the most dangerous pairing of risk tolerance and capacity is the high risk-taker unprepared for a big financial hit.
So, What’s Your Own Risk Tolerance?
Now for some fun in the interest of enhancing your self-awareness as an investor. Before you is the most widely used risk tolerance inventory in the world of finance. With only 13 questions, it yields a reasonably accurate picture of the test-taker’s ability to overcome the adversities inherent in stock investing:
https://www.kitces.com/wp-content/upl...
Circle the best answer for you and then total up your score. There’s no reason to “cheat” or fret. Neither high nor low risk taking is inherently good or bad—whether higher or lower is more appropriate depends on the situation and context.
A Confession
Remember that Steve who couldn’t decide whether to take the stalwart Samantha or the evocative Maria to the prom? The guy who lucked out by freezing after a market meltdown, so he never sold at the bottom and rode the market right back up? That Steve was me. I took Samantha, the more deserving and the safer, as is my wont.
After a stock market decline, people may perceive more risk than before, when the decline may have taken some of the risk out of the market.
---Robert Shiller
The investor’s chief problem—and even his worst enemy---is himself.
---Benjamin Graham
Patty wants to go to the prom with Danny. But with barely two weeks left before the affair, Peter asks her out. Does Patty accept Peter’s invitation or does she wait for her first choice to come through? Play it safe or go for it.
Steve is struggling with a different kind of dilemma. He knows Samantha would accept a date in a heartbeat, but the prom is the last chance for him to have a date with Maria, the exotic transfer student from Brazil. Does Steve choose his good friend or roll the dice with a secret flame?
You Can’t Escape Risk
How much risk can you take without becoming a little anxious? Are you a high or low risk-taker? Could you skip much of chapter 5 because the War of 1812 is so-o-o boring? Samantha doesn’t bother to go over her lecture notes for the final because on the midterm old man Hendrickson only tested on the readings. What about Steve? He reviews everything so as not to be blindsided.
Taking risk doesn’t end with becoming a high school senior. Do you apply to more than one safety school or enroll in calculus to compensate for your low math SAT score. Then, it’ll be making a traditional family or not, and charting a safe or more challenging career. Each stage of life comes with its own bundle of risks and associated anxieties. Nobody gets a free pass.
Investment Risk Tolerance
Success in the stock market partly hinges on knowing your risk tolerance and how it influences your investing behavior. Let’s say your portfolio has lost 20% in the past two months, a rare but not impossible occurrence. Do you buy more stocks at a good price, stand pat or exit in a panic?
What happened to the market? It wasn’t just the market—you were holding too many high-flying technology stocks like Palo Alto Networks and media stocks like Netflix. If you had sprinkled in a goodly number of established companies’ more stable stocks like Coke or Kraft Heinz, you might have lost 10% instead of 20%.
But if after several months high-octane stocks fully recovered from the selloff, you would only recoup only that 10% rather than 20%. Could you handle a treacherous ride to perhaps score really big bucks or are you more comfortable with a smoother, less harrowing experience? Samantha, the test-taking acrobat, might be enveloped in self-criticism if she missed most of the rebound.
What about Steve, the guy who couldn’t make up his mind over the steadfast Samantha or beauteous Maria? He was lucky, a factor which frequently masquerades as investment savvy. His indecision led to doing nothing, which ironically kept him in for the rally. Are you a quick-thinking Samantha or a reluctant Steve? Know thyself and get comfy with your risk tolerance before you take your first plunge.
Let’s look at the four major types of risk. These entail the market itself, interest rates, inflation and unpredictable events.
Market Risk
We’ve just gotten a glimpse of market risk. Although bull markets that ramp up stock prices are more common than bear markets that drive them down, timing the peaks and valleys of the cycle has eluded even the most renowned of market seers. If you take a plunge when stocks are approaching the top, you will be vulnerable in the near-term. That’s why most market observers recommend you stay in the market for at least three years, so you will have time to regain any losses.
Interest Rate Risk
Stock prices are very sensitive to changes in interest rates. The mortgage rate determines the cost of the loan homebuyers must pay back to the bank along with the principal amount. Today that rate is 7%, about the historical average. Lower rates translate into more home buying since more people could afford a mortgage loan, spurring sales of household products like appliances and furniture. Lower interest cost also stimulates business activity as more firms are able to pay for inventory and expansion. Higher interest rates contract business and real estate transactions, dampening the outlook for the economy and stocks.
Inflation Risk
But every so often when times are good and people have more money in their pocket, competition for goods and services drives up prices to unaffordable levels. The government may raise interest rates to tamp down the overheated economy, eventually lowering prices to where people can cover their living expenses and companies can initiate projects. In the meantime, the slowdown in activity usually hurts stock prices.
Event Risk
Additional investment risks originate from outside the financial markets and cannot be prevented by the unsuspecting investor. Both of the two major risks of this kind are considered event-related. A common such occurrence is a sudden development that threatens to decrease the company’s sales and lower profits. This sometimes happens when the operations of a fast-food restaurant like McDonald’s or Chipotle are interrupted by a health scare. More calamitous were the two crashes involving Boeing’s vaunted 737 MAX 8 airliner in 2018 and 2019. Although the stocks of companies impacted by tainted food usually recover once the problem is resolved, Boeing’s reputation and production have never returned to their pre-crash levels. Today, the stock sits at less than half of what it was then.
The second kind of external shock to stock prices is sometimes referred to as a “black swan.” A poignant example was the Covid pandemic. It kept people at home, devastated businesses and ushered in the bear market of 2022, when stocks lost 18%.
Risk Tolerance vs. Risk Capacity
Risk tolerance is very different from risk capacity. The first is a relatively stable personality trait, whereas your capacity to withstand risk changes over time as your life situations and financial needs change. If you’re planning to buy a home and anticipating a high monthly mortgage payment, your ability to absorb a market reversal will be reduced. To be sure, the most dangerous pairing of risk tolerance and capacity is the high risk-taker unprepared for a big financial hit.
So, What’s Your Own Risk Tolerance?
Now for some fun in the interest of enhancing your self-awareness as an investor. Before you is the most widely used risk tolerance inventory in the world of finance. With only 13 questions, it yields a reasonably accurate picture of the test-taker’s ability to overcome the adversities inherent in stock investing:
https://www.kitces.com/wp-content/upl...
Circle the best answer for you and then total up your score. There’s no reason to “cheat” or fret. Neither high nor low risk taking is inherently good or bad—whether higher or lower is more appropriate depends on the situation and context.
A Confession
Remember that Steve who couldn’t decide whether to take the stalwart Samantha or the evocative Maria to the prom? The guy who lucked out by freezing after a market meltdown, so he never sold at the bottom and rode the market right back up? That Steve was me. I took Samantha, the more deserving and the safer, as is my wont.
The post The Boy Who Couldn’t Risk appeared first on HumbleDollar.
Don’t Discount Luck
Ben Carlson's column today is titled "The Ovarian Lottery". Where and when you were born has a whole lot to do with how your life turns out. You could be capable of becoming a great artist, but if you were born female for most of human history you wouldn't be able to reach your potential. Born a serf in medieval Europe? You were going to stay a serf. Sure, hard work helps, but if your particular talent isn't in demand, it only helps so much. Just ask the North Carolina furniture and textile workers laid off after NAFTA.
He also has a quote from Nick Maggiulli: "If you had invested from 1960-1980 and beaten the market by 5% each year, you would have made less money than if you had invested from 1980-2000 and underperformed the market by 5% a year. Sometimes, when you start investing can be more important than anything else". When you start drawing down also matters, of course.
I got lucky: I was born to a middle class family in England right after WWII. That meant adequate food, excellent (free) education and good (free) medical care, plus getting into the tech business when it was just taking off. Being born in, say, North Korea at the same time would have been a very different story.
He also has a quote from Nick Maggiulli: "If you had invested from 1960-1980 and beaten the market by 5% each year, you would have made less money than if you had invested from 1980-2000 and underperformed the market by 5% a year. Sometimes, when you start investing can be more important than anything else". When you start drawing down also matters, of course.
I got lucky: I was born to a middle class family in England right after WWII. That meant adequate food, excellent (free) education and good (free) medical care, plus getting into the tech business when it was just taking off. Being born in, say, North Korea at the same time would have been a very different story.
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