Jonathan Clements's Blog, page 23

What If You Don’t Want to See the World?

From my readings on this site, I seem to be in the minority on a particularly popular and expensive retirement pastime: foreign travel.

Over the years, I've traveled a fair part of the world, from wide-ranging business travel throughout Europe and extensive global leisure travel on every continent other than, strangely enough, the Americas (except for the Caribbean). I still travel. For instance, I was in the Canary Islands just off the coast of North Africa for a 60th birthday celebration in February, and I'm meeting a friend from London in Spain for a week in late September. Suzie and I are currently organizing a trip for next August to see a total solar eclipse.

But my enthusiasm for foreign travel has waned these last few years. Part of it, I think, is a subtle shift from the thrill of novelty to a deeper appreciation for more settled pursuits. After years of navigating airports, packing suitcases, and adjusting to new time zones, the sheer hassle of foreign travel has started to feel less like an adventure and more like a task. With so many popular destinations becoming increasingly crowded, the quiet, more peaceful moments seem harder to find.

It strikes me that most would think this is a most inconvenient time to be losing interest in travel. After all, I'm only 58 and just recently retired. This is supposed to be the time! Get to it! Travel through the go-go years, the world's your oyster! But my travel now seems to have evolved alongside myself, tied to more purposeful and personal reasons. I have no real enthusiasm for destination travel. It has to have a meaningful reason now. Another example to illustrate my point, I'm thinking of visiting my cousin in Australia who recently lost her husband.

I think it's okay to spurn the popular myth around retirement and the expectation to see far-flung places. If that's not your thing, then so be it. It doesn't mean you're doing retirement wrong. Retirement affords you more time to explore your interests. It can be a time of self-discovery. I've often thought about revisiting past childhood passions. I had a very intense interest in astronomy as a youth, and I'm undertaking a foundation course in Astronomy and Planetary Science this September.

Thinking honestly about what really interests or intrigues you and spending your new found time exploring these possibilities is a good starting point. Maybe you have a passion for history or the great outdoors, exploring more of my own country is high on my retirement list. Basing some of your retirement around your interests is just as valid. Do retirement your way and don't feel pressured into following convention.

I've traveled widely, and that certainly colours my perspective. I'm definitely not advocating not to travel. It does expand your horizons and can really make you appreciate your own country and lifestyle. If traveling is your retirement thing, go for it. The world offers many wonderful experiences and beautiful destinations, but maybe just make sure it's your choice and not societal expectations you're following, just your own real travel retirement dreams. Whether it's destination travel or my type of personal intentional travel for a reason, do your retirement your way.

 

 

 

 

 

 

 

 

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AI vs. Urgent Care: Guess Who Got It Right?

The other day, I believe I was bitten on the arm by an insect, which left a fairly large red blotch with a couple of small puncture marks. I assumed it happened while working in our yard. I bought some over-the-counter hydrocortisone to apply to it. After a week, though, it started to look more like a rash.

I decided to visit a walk-in clinic. The physician assistant examined it and advised me to mix hydrocortisone cream with Benadryl cream and cover the area with plastic wrap twice a day. I was also given a prescription for antibiotics to take if the redness didn’t improve within a day.

My wife had doubts about that treatment plan. She immediately went to her laptop and typed the situation into ChatGPT. The AI advised against mixing the two creams and warned that wrapping the area with plastic could trap moisture and worsen the irritation. Instead, it recommended continuing with hydrocortisone cream and mentioned stronger topical corticosteroids like triamcinolone acetonide 0.1% and clobetasol propionate as possible prescription options.

The next morning, I called my dermatologist, not expecting to get in before our trip next week. But as luck would have it, there was a cancellation that morning.

Dr. Olson examined the area and prescribed triamcinolone acetonide—one of the medications ChatGPT had suggested. He also told me I didn’t need the antibiotics the walk-in clinic had prescribed. After about a week of using the new medication, the red blotch cleared up.

ChatGPT can be helpful for information, but it shouldn’t replace medical advice. That said, I do believe AI can help make doctors better, leading to improved care for their patients.

We’ve already seen how the internet has made healthcare more accessible and connected. Patients can quickly research symptoms, access test results, and communicate with doctors through telemedicine and online portals.

I remember visiting my primary care physician in the 1970s for stomach pains. He asked if I was taking any medication. I told him I was—something for a foot ailment. He pulled out a thick reference book, looked up the medication, and concluded it was causing my pain. I was thankful that drug was listed in his book, because back then there was no internet to offer quick access to that kind of information.

Can AI further the advancement of medical care? I believe it can—and already is. It can read scans with remarkable accuracy, assist in analyzing tissue samples, and flag abnormalities faster than traditional methods. It can even help reduce billing errors and prevent fraud.

AI isn’t a replacement for doctors, but it can help them make faster, better decisions. My recent experience showed that when used wisely, AI can be a valuable part of modern healthcare—and a helpful second opinion.

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Dealing with a reduction in Social Security benefits. Is there a backup plan?

A recent post on the Forum raised the issue of dealing with a cut in Social Security benefits - hopefully an unlikely or very temporary event. However, something still worth planning for. 

If the status of SS is not fixed, around 2033 benefits could be reduced by 23-24%. The Committee for a Responsible Federal Budget projects a 24% cut by late 2032 for retirees, equating to an $18,100 annual reduction for a typical dual-earning couple retiring in 2033. That’s significant money.

Have you calculated the possible impact on your overall retirement income? Do you have a backup plan to deal with such a possibility- even if it lasted a few months?

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A Summer of Shared Memories

I noticed a bit of a trend over the summer at my holiday home. Suzie and I were a part of it, as our 10 year old grandson stayed with us for a large portion of the school holiday period. It was wonderful to see so many grandparents helping out in this way.

Our holiday community is gated and has a large play park with extensive grassy areas and a few soccer nets for the kids. The job of supervising was made easy with a friendly and informal rota, which kept anyone from being tied down. It was brilliant seeing the kids play together all summer, literally from morning until late in the evening. They only came in for food.

They spent many full days at the harbour, paddleboarding and jumping into the sea, and had fun picnics on the beach with evening BBQs around driftwood fires. Cycling adventures on the easy, plentiful paths were also a heavy feature. In short, it was as close to an ideal summer childhood as you could wish for.

Not only was this brilliant for the ragtag band of grandchildren, but it was also a boon for their parents. Knowing that summer childcare had been taken care of must surely lower stress levels and relieve the pressure of juggling kids and working life over the summer season. It was a win for everyone and a great example of the benefits grandparents can bring to the table.

From my own perspective, it also made me feel younger inside. So much messing around with the youngsters definitely tweaked my mindset, and I seem to have captured a glimmer of my childhood again. It was a win-win situation, the kids got a summer of fun and I got a tiny bit of reflected childhood back.

I'm a bit melancholy now. They have all returned to school, and I miss that little gang of kids. Their giggling when crab fishing will stay with me forever. It was a fun summer. I'm so glad I retired this past April and could experience this opportunity. I guess my slightly sad mood makes me think about this one fact: it's a sad reflection on our consumer-driven society that the majority of parents have to work so hard to provide a secure lifestyle for their family, causing them to miss out on so many special, shared memories. Maybe I'm being foolish and slightly naive, but wouldn't it be lovely if this wasn't the case and a better work-life balance was the norm?

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The Wages of Success

I worked and earned income from 1963 to 2022. I always saved a portion of my earnings. Some was “parked” in real estate, some in the stock market, some in bonds and some in a traditional savings account.

Every dollar I saved represented many hours of true labor. Some was as a business owner, some as an engineer, some was “sweat equity” in my homes and RVs, and some labor was expended by maintaining a commercial property.

I didn’t spend all of my income from “work”. I "parked" a portion of the proceeds from that work via investments so I could draw upon them in retirement. I concluded this would be "shadow working" while I was retired. Today, every dollar I pull from my retirement accounts represents wages for my past effort and work success. During my actual working life at least 10% of my hours were “banked” for the future. In essence the echoes of my many years of labor are reverberating today, in the present. My savings are working for me today, but every dollar represents a small amount of physical or mental labor I expended in the past.

This perspective influenced how I invested. Each investment was as if I were asking myself “What company is worthy of my efforts”? Which companies would be better stewards and are aligned with my values? This was a personal approach to investing and I’m sure I left “profits” on the table; there were many companies I deemed to be unworthy, or which had unsavory businesses or business practices.

As a business owner I made a decision each year about how much “profit” to leave in the company. I could invest it in my firm, or share with others via dividends, bonuses or profit sharing. I decided how much to invest in my business. Or, I could have bought a bigger boat, etc. There were a few lean years when I left the earnings in the company and my administrative assistant made more than I did. That too was an investment. An investment in the people and in the business.

Taken to an extreme, this could be unhealthy. When the Dot-Com bust occurred I thought for a brief time of the hours I has spent working to accumulate the savings for those “investments”. However, it reinforced a need for better scrutiny and methods on my part.

My retirement has absolutely nothing to do with my success as an investor. It has everything to do with my decisions as a worker, what I did with the fruits of my labor and my cautious, minimalistic approach to possessions; I could have spent a lot more than I did. Better cars, bigger boat, more toys, etc. So today, as I sit on the deck at the pond alongside two of my RVs, I’m not here because of any success in the stock market. Same is true for when we are in our home in Arizona. This is all literally a consequence of years of conscious, thoughtful decisions I and my spouse made for decades (me for 59 working years) and our many choices and years of “living small” while enjoying life and banking a portion of our labors.

So, today, the stock market and my bank are working for me. I can see my shadow in every dividend or gain that I receive. Some may disagree with my perspective, but overall, I think I have had an empowering way to approach life, work, saving and spending. Sufficiently empowering to get me where I am, today.

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The Seeming Irrationality of Unneeded Risk

I might be hitting my head against a brick wall, but it's a rather poor show that "RDQ" gets all the down arrow glory and doesn't share. Maybe I need a few arrows with this doozy of a post.

Let me roll out my pre-retirement risk credentials. I quit a corporate job when I reached the level of director, with lots of stock purchase opportunities, a high salary, and a solid pension package. I left all that to start my own business—a very risky move, but one that was well within my risk envelope.

Before I retired, my portfolio was heavily invested in developed world funds and specialist China and Southeast Asian "special situations" funds. My wife Suzie's advisor nearly lost his eyebrows when he first laid eyes on my portfolio's risk level. I simply shrugged my shoulders; I was totally comfortable with my exposure.

In short, I'm no stranger to financial risk and have a very high tolerance and ability to take it. But here's the thing: I'm now retired and have dialed down my risk level because I simply don't need to stretch for significant growth to support my lifestyle.

A fixed-term annuity is now one of the main planks of my retirement. I still have a very high capacity for risk, but I've deliberately chosen a retirement income and cash flow strategy that gives me what I need at the lowest possible risk, outside of social security. I truly wonder why such a small portion of retirees opt for this choice.

In my mind, once your income goal can be easily met, or once the required growth to support your desired lifestyle is minimal, taking on additional risk becomes unneeded and, therefore, irrational. To reiterate, I still have the financial capacity to absorb losses but no longer need to take those risks to achieve my lifestyle goals. If you're in that position, why would you still take the risk?

I guess it will be a combination of the normal behavioural biases: FOMO People see a rising stock market and worry they are leaving money on the table by locking in a lower, fixed return and Loss Aversion: The idea of giving up control of a lump sum of money in exchange for an income stream can feel like a "loss" to many, even if it's financially sound risk mitigation tool.

When you couple this with a general negative perception of annuities due to complex products, high fees, and stories of unsuitable sales along with the fact many people don't understand the different types (like a fixed-term vs. variable) it is understandable why the entire category might be dismissed out of hand. It must be said I'm not Captain Kirk's sidekick Spock, full of logic and no emotion, when the market goes on an upwards rip, I feel the FOMO just like anyone else!

It's not just behavioral biases at play; even established theory seems to be misunderstood. Modern portfolio theory (MPT) actually supports the use of fixed income products and bond ladders within a retirement portfolio but this seems to be overlooked in favour of other elements of MPT. Here's what I find particularly puzzling: the investment community often portrays annuity purchases as unsophisticated, as if only financial novices would "give up" market upside. This seems backwards to me.

The sophisticated approach is optimizing for your actual situation, not maximizing for theoretical returns you don't need. Once you've won the game and have a strong plan for inflation management, why keep playing with money you don't need to risk? It seems to me to be the opposite of a smart strategy.

Of course, I recognize there are valid reasons some retirees might choose higher risk - perhaps they want to maximize bequests to family or charity, or they're concerned about long-term inflation exceeding what fixed income can handle. These are rational choices for their specific situations.

If you're retired and can meet your lifestyle goals with lower-risk strategies, taking additional risk isn't bold—it's somewhat counterintuitive. The goal isn't to die with the most money possible; it's to live comfortably without worrying about sequence-of-returns risk or market volatility derailing your plans.

Yep, I'll suffer those down arrows gladly because sometimes I think it's refreshing to challenge conventional wisdom just to keep our views flexible and not get stuck in a rut. Occasionally, the most contrarian position is possibly the most sensible one.

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2024 Update to the OASDI Beneficiaries by State and County

Almost four years ago I wrote an article about the 2020 OASDI Beneficiaries by State and County report. The report is put out by the Social Security Administration (SSA), and provides a wealth of interesting statistics. Here is the link to the 2024 report where you can investigate detailed national and local data.

Here are some basic numbers for context. As of December 2020, the U.S. population was 329,484,123. Four year later it had grown 3.5%, to 341,145,670. About 20% of the population receives some form of benefit. The population age 65 or older grew by 9.9%, to almost 18% of the population. The number of people receiving retirement benefits grew by a slightly less amount of 7.1%.  The table below provides some data indicating the change over the last four years. It’s not surprising that our population is trending older.

Item                                                    2020                            2024                     Increase 

US Population                                     329,484,123                341,145,670                3.5%

Population 65 or older                        55,659,365                  61,179,918                  9.9%

Receiving Benefits                              64,850,867                  68,455,973                  5.6%

Retirement Benefits                           48,329,595                  51,772,651                  7.1%

Survivor Benefits                                5,874,648                    5,785,602                    -1.5%

Disability Benefits                               8,151,016                    7,231,147                    -11.3%

West Virginia still has the largest population receiving benefits at 27.1% of the population. After that come Maine, Vermont, New Hampshire, and South Carolina.  Utah claimed the prize this time as the state with the lowest portion of the population receiving benefits, at 13.5%. The report provides county by county data for the 50 states, US territories, and US citizens living abroad. My favorites statistic is there are 360 people receiving benefits whose whereabouts are unknown.

Four years ago, I concluded the article by expressing hope that Congress would eventually make changes to shore up Social Security—because politicians wouldn’t want to risk the wrath of their constituents who are most likely (seniors) to vote. Almost four years later I still have hope, but it’s waning.

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Humble 10% Win: The First Financial Benefit of Retirement

I've just encountered the first positive financial benefit of officially being retired from the workforce. My car insurance renewal notice appeared in my inbox, and being the person I am, I contacted the insurance company to inform them of my change in circumstances from employed to retired.

What's particularly noteworthy for those of us just starting retirement is to remember to contact your insurer. Many people might just pay the renewal notice without thinking about updating their information. A simple phone call led to a 10% saving. This shows the importance of staying on top of your finances and actively communicating with service providers about any life changes.

A 10% saving is a nice little win for a phone call, and as the saying goes, every little bit helps. Now I have a bigger problem, what am I going to spend that $40 on???

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1031 exchange

I live in a paid off house in Kansas City Missouri and I have 2 paid off rental properties here also. I eventually would like to move to Delaware. My idea is that I either do a 1031 exchange selling one of the rentals and buying a more expensive rental property in Delaware by about $200,000 more and then some day in the future, maybe in 4 years, move to Delaware and have that property become my primary residence. The alternative is to just sell the house I live in and use that money to purchase a rental in Delaware and then move into one of the rental properties here until that 4 or 5 years passes and then move to Delaware. I am not sure of the implications of moving into a property that was a 1031 exchange. Or for that matter the tax implications of moving into a property that was a rental, making it a primary residence for 4-5 years and then selling to move east. I am aware I would need an attorney who is versed in 1031 exchanges. I haven't done that quite yet but thought I'd ask here to see if anyone had words of wisdom of how I should swing this conundrum.

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Frugality, Minimalism, and Aligning Values

I’ve always been a minimalist – even as a teenager I had no interest in having lots of clothes, shoes, or other trappings of high school life in the 80s. That pull toward minimalism was reinforced during the 2 years I spent teaching English in Japan after college. No dedicated bedroom that sits empty and unused all day? My bed folds up and is stored in the closet? A tiny fridge forcing me to buy fresh fruit and vegetables every other day? Fantastic public transportation so I didn’t need to own a car? I was in heaven.

I’ve read with interest recent articles and comments about frugality – what it means to be frugal, examples of frugality, and what motivates people to adopt a frugal lifestyle. It got me thinking about my own spending habits, and their intersection with my minimalist lifestyle. I realized that while I certainly fit the definition of frugal, my spending, or lack thereof, is not motivated by a drive to save money. Rather, it’s closely tied to my desire to tread lightly through the world; I want to minimize my footprint (i.e. reduce how much of the world’s resources I appropriate for my use) and not be weighed down by ‘stuff’.

For me, minimizing my footprint means embracing habits like buying items used when possible, putting on sweaters when it’s cold, rather than cranking the thermostat, and taking public transportation when possible (sadly, that’s not too often in this country). While those habits save me money, other footprint-minimizing habits, like buying local and avoiding Amazon, Target, Walmart, and other big box stores, do not.

Not owning much ‘stuff’ checks both boxes: it reduces my footprint and doesn’t weigh me down with things I don’t need. I love the freedom this brings me. My partner and I left the Bay Area a few years ago and have been semi-nomadic ever since. Everything we own in the world fits comfortably in a 5x5 storage unit (that was the smallest size available) – I think of it as renting a closet! When we travel, we each bring a 22L day pack as our luggage, and even on a 3-month trip to Europe, we had room to spare.

I love that the concepts of frugality and minimalism both encourage a person to be thoughtful and intentional about how they are living. So many of the messages we are bombarded with daily are about consumption of ‘stuff’ that advertisers convince us we can’t live without. I think Wordsworth had it right when he said. “The world is too much with us; late and soon, / Getting and spending, we lay waste our powers;”.

I know from reading this forum over the past few years that in answering the question of how best to spend our time and resources, we’d all come up with wildly different answers; there’s a reason Baskin-Robbins has 31 flavors of ice cream! The beauty of taking the time to reflect and to make conscious choices, is that we can be more confident that our spending – of time and energy, not just money! – aligns with our values.

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