Jonathan Clements's Blog, page 22
August 31, 2025
Jonathan, you’re in our thoughts and prayers
Since you haven't posted much on HD in over last two months (that I'm aware of anyway), I assume you must be suffering the full brunt of your disease. Please know this community you built thinks of you often, and that we continue to offer our collective thanks and encouragement to lift your spirits in whatever small way we are able.
As a reminder to others, I sent a $1,000 gift to the Bogle Center for the Jonathan Clements Initiative, and encourage you to make whatever contribution you are able to as well. Here’s the link: https://boglecenter.net/donate/
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August 29, 2025
Risky Business
On the one hand, we could dismiss this concern by noting that all-time highs aren’t as uncommon as they might seem. According to one analysis, the U.S. stock market has been within 5% of an all-time high on 44% of trading days since the 1950s.
On the other hand, because market downturns have been a regular feature of the stock market throughout history—and have always arrived without warning—we should never minimize the importance of risk management. In setting the asset allocation for a portfolio, I recommend this four-step process to account for risk:
Step 1 is to make an allocation for withdrawal needs that are quantifiable. Suppose you’re retiring soon and know you’ll need $100,000 from your portfolio each year for expenses. Recognizing that past market downturns—outside of the Great Depression—have averaged five years or less, you could simply set aside five years of withdrawals—$500,000, in this case—in a combination of cash and short-term bonds. Strictly according to the math, that might be sufficient, but I wouldn’t stop there.
Step 2 is to budget for financial surprises. I recall, for example, once moving into a new home and being informed that the roof—which had been advertised as new—needed to be replaced more or less right away. While difficult to quantify and hard to predict, these sorts of financial surprises should be factored into any asset allocation.
Step 3 is to account for what I like to refer to as the Mylanta problem. The stock market’s ups and downs can be stomach-churning. Even if you’re years away from retirement or any other potential portfolio withdrawal, “paper losses” can nonetheless be upsetting. This is especially important for younger investors. Until you’ve lived through a few of the market’s uglier downturns, you may not know how you’ll react to seeing your portfolio’s balance sink.
The fourth step is to bear in mind the standard investment disclaimer that past performance doesn’t guarantee future results. Since the 1930s, the U.S. stock market hasn’t experienced a downturn that lasted more than five years. But we shouldn’t ignore the possibility that something like that might one day occur.
Consider Japan. While it may be hard to remember, Japan in the 1980s was arguably the world’s most impressive economy. That’s when it surpassed the U.S. in many industries, including automobiles and electronics. Its banks became the world’s largest, and its real estate market saw extraordinary gains. The land beneath the Imperial Palace in Tokyo was famously said to be worth more than all the real estate in California. That all contributed to huge stock market gains. But after peaking in 1989, Japan’s Nikkei—the equivalent of our S&P 500—slumped and didn’t fully recover for 34 long years. That’s why the final step in choosing an asset allocation should be to build in more conservatism than might seem necessary.
These four steps represent the traditional approach to managing portfolio risk and, in most cases, I’ve found them to be effective. But until now, there hasn’t been an easy way to connect this approach with another popular risk-management strategy known as the 4% rule. In his new book, though, William Bengen, creator of the 4% rule, shows us how the two can be used together.
If you’re not familiar with it, the 4% rule is a framework that Bengen, a retired financial planner, developed back in the 1990s. His goal was to help retirees decide on a portfolio withdrawal rate that would be sustainable over the long-term. He found that the ideal initial withdrawal rate, to minimize the risk of outliving one’s savings, should be no more than about 4%.
When Bengen rolled out the first version of his research in 1994, he made a simplifying assumption. In each of the scenarios he examined, he assumed the same asset allocation: 50% stocks and 50% bonds. That made sense because Bengen’s primary focus at the time was not on asset allocation but on withdrawal rates. In his new book, though, titled A Richer Retirement , Bengen considers other allocations. The results are extremely useful.
In looking at the full set of asset allocation options, Bengen found there to be an optimal range: Allocating between 45% and 75% of a portfolio to stocks led to the highest long-term sustainable withdrawal rates. Why? Allocations below 45% caused portfolios to lag behind inflation. Allocations over 75%, on the other hand, ran into trouble because they couldn’t recover from deep market downturns. But between 45% and 75%, Bengen found that an initial portfolio withdrawal rate of close to 5% would have been sustainable throughout a 30-year retirement.
This new data is helpful in two ways. First, it reinforces a point Bengen has always emphasized: that despite others calling it the “4% rule,” he himself never saw it as a rule. In his own work with clients, Bengen said, he regularly used 4.5%. And depending on other variables, such as the investor’s age, he felt that withdrawal rates could be even higher.
Another way this new research is helpful: It addresses a weakness in the traditional approach to asset allocation, which is that it tends to break down for higher net worth individuals.
Consider someone like Bill Gates. He could afford any asset allocation. If he held all his assets in bonds, the value of his portfolio would erode due to inflation, but because of its size, that erosion wouldn’t really affect him. Similarly, he could afford to keep everything in stocks. Market downturns would impact his portfolio, but never enough to affect his lifestyle.
While Bill Gates is an unusual case, I’ve found that this dynamic begins to apply even for “ordinary” millionaires. And while it might seem like a good problem to have, it does complicate the asset allocation decision because it means there’s no quantitative reason to choose one allocation option over another.
But with Bengen’s new research, investors now have a more tangible guideline. Even Bill Gates, the data tell us, should maintain an asset allocation within that 45% to 75% range.
As I’ve noted before, there are two answers to every financial question: what the calculator says, and how we feel about it. To be sure, the numbers Bengen present are in the category of what the calculator says. And just like the 4% rule wasn’t truly a rule, this new 45%-to-75% range shouldn’t be viewed strictly as a rule. Everyone will make their own decision. But it does help investors answer a question that, until now, had no easy answer.
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 Risky Business appeared first on HumbleDollar.
Shifting Gears
We have been taking a 3% distribution from the IRAs, mostly from my account due to the Required Minimum Distribution (RMD), and end up transferring excess funds into non-qualified savings and brokerage accounts.
At ages 73 and 70 I know it’s okay to spend that money, but like many other HDers, I struggle to shift into spend down mode.
Last week I dusted off the old Excel Spreadsheet and did a look back at our spending versus income so far this year. I was surprised to see that so far this year we have actually spent about a third of the 3% distribution.
My first thought was to do a deeper and more detailed dive into where the money went. We use credit cards for as many things as possible in order to collect cash back, and aside from the general category breakdown from the issuer, I have little clue of how specific purchases add up. Are we falling prey to lifestyle creep?
My next thought was to not worry about it, we’re having a good time. Even if we spend the entire 3% we’ll probably die with more money than we have now.
I’m not going to go crazy buying junk I don’t need, and I’m still using digital coupons at the grocery store, but I seem to be getting more comfortable dipping into the nest egg.
Does anyone think that I should head over to the Ford dealer and pick up that new Mustang I’ve been looking at? You know, while I can still get in and out of it.
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New 2026 W-2 Form
Just as I predicted in the "OBBBA Tax Breakdown", the IRS included new boxes for line 12 of the W-2:
TA - Employer contributions to your Trump account.
TP - Total amount of qualified tips. Use this amount in determining the
deduction for qualified tips on Sch. 1-A (Form 1040).
TT - Total amount of qualified overtime compensation. Use this amount
in determining the deduction for qualified overtime compensation on
Sch. 1-A (Form 1040).
So, for the purposes of calculating overtime or qualified tips deductions, these figures can easily be referenced. However, for 2025, the IRS is still coming out with the updated guidance, and no changes will be applied to the 2025 Form W-2.
This also means that the IRS is coming out with the new Schedule 1-A. This will include the tips and overtime deduction, and likely the new senior & car loan interest deductions.
Enjoy the Labor weekend all!
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A safe corner of the internet
I am a newcomer to Humble Dollar. I didn’t have the privilege of Jonathon’s writing & wisdom through his long career with the Wall Street Journal. So I write this from the perspective of someone only recently introduced to this community.
With recent discussion about “up-votes” and “down-votes”, I just wanted to offer my humble (no pun intended) opinion, and a hope that we can all find some gratitude for this very special place on the internet.
From time to time I will ponder some topic. Usually this happens because I repeatedly hear a particular view expressed in the news or on blog sites. After I while I might find that I disagree with that view, or it leads to some tangential perspective. And whilst pondering, I find that I would really like to put thoughts in words, and get them out into the world.
And the only place on the internet where I feel safe to publish my thoughts is on Humble Dollar. I know that if I submit my opinions in a calm and thoughtful way, that I will receive calm and thoughtful responses. I can’t think of anywhere else on the Internet like this.
I understand the concerns about “up-votes”, “down-votes” etc. but I think it’s worth reflecting on how fortunate we are to have this little corner of the internet that remains a safe space to think, express and interact.
Many thanks to Jonathon and all those who make this possible.
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RDQ’s “down arrows” —> My 1 cent :
Rather than being lost in the middle of a prior post, I thought I would put this more front and center given:
1) it currently has 7 down votes
2) which prove my point
3) Thanks to David Lancaster for your comment, included below, for what seems to be a “courageous act” on your part !
Why is there “voting” on peoples comments ? If you have a comment, either positive or negative, post it. Otherwise, keep it to yourself if you don’t have the intestinal fortitude to post it publicly.
Is this Facebook or Instragram ? Are we posting to get “Likes” ?
It is childish and beneath the dignity of this blog site. Are we not adults here ? The ability to vote on comments should be removed.
Reply
David Lancaster
14 hours ago
Reply to Mark Bergman
Despite your down votes, I agree 100%. This site seems to be headed in the wrong direction. This site is the closest I get to social media. I have always enjoyed the comments, and the fact that, whether I agree with them or not, they are directed at the topic, not an attack on the writer’s personality.
I keep away from social media because it has become the cesspool of the internet. I truly hope that this site does not become one that I feel I can no longer feel comfortable interacting with due to the tenor of the commenting, and increasing number of down votes for innocuous comments on certain writers’ posts that seem like they are negative just because of who they are.
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re RDQ’s “down arrows” —> My 1 cent :
1) proven my point
2) I am making it a post of its own.
3) thanking David Lancaster for being the only one who actually bothered to leave a written comment, see below.
re RDQ’s “down arrows” —> My 1 cent :
Why is there “voting” on peoples comments ? If you have a comment, either positive or negative, post it. Otherwise, keep it to yourself if you don’t have the intestinal fortitude to post it publicly.
Is this Facebook or Instragram ? Are we posting to get “Likes” ?
It is childish and beneath the dignity of this blog site. Are we not adults here ? The ability to vote on comments should be removed.
David Lancaster
12 hours ago
Reply to Mark Bergman
Despite your down votes, I agree 100%. This site seems to be headed in the wrong direction. This site is the closest I get to social media. I have always enjoyed the comments, and the fact that, whether I agree with them or not, they are directed at the topic, not an attack on the writer’s personality.
I keep away from social media because it has become the cesspool of the internet. I truly hope that this site does not become one that I feel I can no longer feel comfortable interacting with due to the tenor of the commenting, and increasing number of down votes for innocuous comments on certain writers’ posts that seem like they are negative just because of who they are.
The post re RDQ’s “down arrows” —> My 1 cent : appeared first on HumbleDollar.
No, I did not have a heart attack, but I surely got a lot of tests
When my cardiologist called, she used words I rarely hear. I asked her to hold on as I put my cell phone on speaker so my wife could hear. She repeated, "You were right!"
Many weeks before, after my Apple watch suggested I had Afib, I called my cardiologist, who happened to be on vacation. The doctor on call suggested that I go to a trauma-equipped ER hospital.
I arrived unannounced and explained the reason for my visit. Within 2 minutes, blood was taken, and I was hooked up to an EKG machine. After reading the EKG, they sent me to the waiting room. By the way, I was feeling just fine throughout. But they gave me lots of tests in the hospital, and my cardiologist gave me more a few weeks later. I passed them all, but the mystery remained. Why were my TROPONIN levels so high and not dissipating?
I suggested that I also had unexplained elevated CK levels, another muscle enzyme. She ordered additional blood tests to check both CK and Troponin levels. The blood lab determined that I also had something that caused a false positive for high troponin, caused by my mysterious high CK levels (I guess I'm just one of those people).
The reason for the background information is that I was instructed to include the lab report in the Medical ID and Health app on my phone.
Her concern was the potential of being treated for a heart attack when, maybe, I just had indigestion.
Emergency personnel depend on the information we add to our phones. Keeping it up to date is a task we cannot ignore.
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Still a Wild Child: When Spending Habits Never Grow Up
My friend is an independent IT Systems Integrator. She essentially pitches for tenders from large corporations and government departments for help with new software integration. It's a very well-paid job, but there can be lulls between contracts. This requires a good deal of business savvy to manage not only the workload and tendering process, but also her intermittent financial situation and the need for constant training to stay relevant.
A woman who has her life together you would think. I know her very well, we first met during the global live aid concert being staged at Wembley in London in the mid 80's. She was a bit of a wild child and we have a lot of history together. But here's the thing, she's no different today when it comes to personal finance.
She can burn through cash faster than I can blink. We met up recently, and over a few drinks we started talking about my recent retirement and the hopes for her own retirement. We know each other's life struggles intimately, and she had no problems telling me the personal numbers. My shock was evident, she's not in a good place.
We spent a long evening brainstorming her choices and possible paths going forward towards retirement. The problems are compounded by her age in a young person's game and the gradual whittling away of her dependable business contacts due to their own retirements, her network is fading just like her retirement dreams.
I came away from our time together slightly downbeat. I would love to say we found a brilliant solution, but alas life is real and happy endings are sometimes only the work of fairytales. I don't know if there's any moral to this story other than the obvious around the importance of planning for your future self. In this case the horse has well and truly bolted.
Maybe there's a little hope yet. She has a low six-figure sum in retirement accounts and, luckily, owns her property in a high-value area of London outright. Downsizing is a possible framework to more than triple the available working capital. A few good years of income generation squirrelled into savings, and a possible route to an okay retirement becomes feasible.
I guess there's a peculiar shame in being financially sophisticated professionally while feeling out of control personally - like a split personality between the confident consultant and the woman who can't say no to beautiful art or expensive restaurants. It's not ignorance driving her spending; I'm not sure what is but hopefully she can overcome it.
I think that's the best she can hope for. It's just sad that her hedonistic consumption has robbed her of a great retirement. My only hope is the professional determination she applied to her career can now be turned inward towards changing a lifetime of engrained spending habits. I cross my fingers and wish for success. My friend, the wild child from Wembley, unfortunately needs to finally confront her past choices.
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August 28, 2025
My thoughts on technology- can’t get enough
I am fascinated by technology these days although I am certainly not a techy. Hey, I remember when a copy machine used a tank of foul smelling chemicals and one copy took forever and then was on damp grey paper.
New technology at work was once an IBM word processing center using 12” disks. My first printer was dot matrix using a roll of perforated paper and now I’m writing this on the beach using an iPad linked to my iPhone for a world-wide connection.
I recently gave a 3d printer to two grandsons ages 10 and 12. They had it operating in a few minutes. They trade software to make things they want. The 12 year old asked his mother to make donuts so he could have the hole. He printed a form to cut the donut and the hole. A plastic hose connection broke so he found the software on line and made a new one.
My car is my new best friend. It talks to me. Hey, Mercedes take me to nearest Cracker Barrel. Connie likes conversation. “Hey Mercedes, how do you feel?” The response, “much better hearing your voice, thank you.” My favorite so far was, “hey Mercedes, where did you come from.” Response, “Very creative and talented engineers.” And, it tells me it keeps learning to do more things. I asked it to open the sunroof, but was told she wasn’t allowed to do that because of safety laws in “your country.” It’s nice to know that if I didn’t live in the U.S. my car could open the windows.
Of no particular value, the car will make the sound of just about any animal you ask. A passenger was shocked when he heard an elephant next to him.
There is technology in all Mercedes now that detects potholes and shares the information on its network alerting drivers anywhere if a pothole is nearby. I have found sometimes the pothole is already filled.
When it comes to money and investing, technology brings it all together and makes it work. We have come a long way from having our savings book stamped. Now we send money via Zelle and deposit check with our phone. There is one annoyance that bugs me. When I login to my bank with an iPad it insists on verifying it’s me by sending a verification to my phone. I appreciate the security effort, but what if my phone is not with me or in another room. Really annoying and inconvenient at times.
AI is quite amazing even though it’s criticized. I use several versions to create drawings I use on my blog. “Pencil draw a group of people leaving a hospital,” I asked, and within 30 seconds there is was.
These are all rather frivolous uses compared with robotic surgery and assembly lines, science and drones.
I am waiting for one new breakthrough I have been talking about for years, but have been told it can’t be done which I don’t accept. I call if feeling transfer. The concept is simple. A doctor asks how you feel, where does it hurt, how strong is the pain? A connection with your brain similar to an EKG or EEG transfers what you are feeling so the doctor feels it too. It may seem far out now, but you can bet someone out there is working on the concept. It only electrical currents, right? 👀
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