Jonathan Clements's Blog, page 25
August 22, 2025
Jonathan Clements Initiative at the Bogle Center for Financial Literacy
I started to donate, and then the 'mind chatter' started- is this the best way to help? how will they track whether this approach actually helps young people to become better savers and investors?, etc. ( I'm sure I'm not the only person here with many voices in our heads chiming in on financial decisions.) I donated to the Initiative and hope it will prove useful and life-changing in many ways. But my final reasons for donating were: I have benefitted greatly from Jonathan Clements' writings. If he thinks this is a worthy effort to try, then I want to support it out of gratitude and respect. And I'll pay attention to what happens, and make further donations based on what is learned from this effort.
I find making donations to charitable efforts challenging. Charity Navigator is one tool that helps, but I also support some smaller organizations that are still in the 'start up' phase and don't (yet) have good track records and are still working out metrics to evaluate effectiveness. I would be curious to know how others make charitable donation decisions and what they've learned in this area (including how to work with mind chatter!).
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Does Social Security work?
I say it does, but that does not stop it from being attacked. The words Ponzi Scheme are being thrown about. The fact it is underfunded is being used as a argument that it doesn’t work. Some in government are calling for it to be replaced with private accounts. I read one official say there is plenty of money to pay all the benefits to those now collecting, but we can’t continue. Well, that’s not true on either point.
No doubt Social Security is underfunded, but that is the fault of every Congress since the 1990s and of the Americans they fear will not support higher taxes or other changes. That is not a valid reason to claim the system can no longer work.
It’s true the worker to retiree ratio is shrinking-fewer workers to support a growing number of retirees and that needs to be considered as well and can be over time by increasing the tax paying base - another discussion.
The irony is that making Social Security sustainable requires relatively minor changes and increases in funding. If changes had been made gradually over the years, they would hardly be noticed. For example, today just increasing the payroll tax by 3% (1.5% each on employer and worker) and applying FICA to employer cafeteria plans results in 97% of funding covered for the next 75 years (Committee for a Responsible Federal Budget SS calculator.) That amounts to about $17.00 a week for the median wage earner - meaning half would pay less. That seems a small price for future retirement income. The increase would be considerably lower had it been applied ten years ago.
The challenge now is a general anti-government anti-tax ideology in favor of individual empowerment and responsibility.
What’s missing is a realistic understanding of human behavior- in this case related to finances and long-term planning. Americans are not even adequately saving and managing money for their share of retirement income, let alone all the required income.
I used to joke that there was no reason to worry about Social Security, it will always be there. My confidence is waning.
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August 21, 2025
Are Bank Loan funds the same as private credit?
I have invested in the Fidelity Floating Rate High Income Fund (FFRHX) for many years. Morningstar classifies it as a bank loan fund. The expense ratio is 0.73% and it is yielding 7.78%. It loans money to BB and B rated companies and adjusts the interest charges every few months so duration is minimal. Is there any significant difference between a fund like this and private credit?
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Bah Humbug! It’s Not Even September Yet
I was in a large discount retailer yesterday with my grandson, picking up some school supplies for his return to school after the summer break. Bearing in mind it's late August, around 20% of the store was roped off while staff were busy unboxing and displaying Christmas merchandise. Unbelievable!
I overheard a few people asking staff when the display would be open for business, and you could sense a general excitement within the store about this new buying opportunity. I think the tills will be busy when it is.
As is my habit, this got me thinking. While most of us use these types of stores, they really target individuals with lower disposable incomes and can be a lifeline for families on a tight budget. This is the very demographic that research constantly shows is failing to save enough into retirement accounts; an often-cited figure is that around 35% have no savings at all.
The same consumer who relies on a store to stretch their budget for essentials is being enticed by highly effective marketing to spend on non-essential, holiday-themed items months in advance. The psychological triggers that make us excited to buy tinsel in August are often at odds with the discipline required for long-term financial planning.
The desire for immediate gratification—the thrill of a new purchase—can overshadow the need for delayed rewards, such as saving for a secure retirement. While a single holiday purchase may not seem significant, the cumulative effect of a culture that encourages constant spending can make it even harder for vulnerable populations to break the cycle of living paycheck to paycheck.
It may be easy for me, from a position of financial security, to have these thoughts, and I might come across as judgmental. But that's not how I feel at all. I look at this from a place of true concern for the unpreparedness many people face as they move toward retirement.
The best early Christmas gift for a lot of people wouldn't be more baubles and shiny plastic novelty presents. Instead, it would be the gift of opening a 401(k) and sending their future self a thoughtful and worthwhile treasure to be enjoyed for many years to come.
Happy early holidays, and bah humbug to you all on this sunny August morning.
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August 20, 2025
Do taxes paid from a qualified annuitized annuity offset RMDs from another ira account?
income from a qualified, annuitized annuity will count toward a rmd from
a separate ira account. Is this accurate?
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The Tax Man Cometh, and I Think It’s Okay.
Solid examples like this of our hard-earned income being reduced by that “nasty tax man” can make the abstract concept of "tax benefits" feel concrete and real. On a personal level, I have never had any concerns with paying my fair share of tax. I know many people who work “cash only” with a portion of their income and others who really struggle with the idea of being subject to this basic fact of life. I've given up debating with them. I find it challenging to sympathize with the viewpoint that one should be exempt from this civic duty .
I sometimes wonder to myself if these people follow their tax opinions to a logical conclusion? I feel that tax isn't just an optional fee; it's an investment in the roads I drive on, the schools my grandkids attend, and the safety we often take for granted. It’s the cost of living in a well-ordered society. By paying our taxes, we ensure that the benefits—from the inspiring museums I visited to the police force that protects us—are available to everyone, not just those who can afford them. It’s not just a burden; it's a shared investment in a modern country.
I don't have to, if you excuse the pun, tax my brain for other examples . The streetlights that make Suzie and my evening walks safe, for example. The coast guard that protects our shores and saves lives. Research Grants that fund breakthroughs in science and medicine. These are not just funded by a handful of philanthropists, they are also funded by the contributions of millions of taxpayers. When we begrudge paying tax, we’re essentially begrudging these hidden benefits.
I'm sure many will disagree, but it seems to me that a reluctance to contribute can lead to an unfair system, where some want to enjoy the benefits of a nation's infrastructure and resources without sharing the cost. This perspective taken to the extreme, I believe, could undermine the collective foundation of a civilized society. I'm very industrious and meticulous with legally reducing my tax bill to the minimum and hold a healthy skepticism about government spending. But It's a simple fact that the cost of living in a modern country must include a collective tax contribution. This shared burden is what ensures the well-being and security of everyone, without exception.
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Rehashing the age 70 thing. Tell Dear Dickie what is it that he doesn’t get about SS at age 70?
I simply cannot understand why anyone living off their investments would use those investments to live on in favor of delaying social security until age 70.
It seems to me that unless there is a gigantic pool of money they’ll never need, they are taking an unnecessary risk using more of their investments sooner rather than later. I think they call it opportunity cost. I used three AI apps and they all had the usual arguments for and against delaying to age 70. They were consistent about taking benefits when you need the money to live on and cautioned about using other assets just to delay.
Yes, I get some of it. A higher monthly SS benefit and with it a possible higher spousal survivor benefit. But part of the value there is the age difference between spouses. Assume age 70 is achieved, the life expectancy for males: is approximately 14 to 15 years. for females: approximately 16 to 17 years. Unless there is a significant younger age difference for a surviving spouse, there is not much time for the higher benefit to be needed - statistically. And you can provide for survivors in other ways.
Is a retirement plan going to succeed or fail based on the higher monthly Social Security benefit starting at age 70? Is that more important than accumulated assets and sustaining, if not growing them, for an extra three years or so? What if the person wants to retire earlier than FRA, is the extended period using more investments before age 70 still valid?
I read these words on Open Social Security “The strategy that maximizes the total dollars you can be expected to receive over your lifetimes is as follows:” Sometimes it is age 70, sometimes not, but I say “so what?”
Why would that be my goal? Besides, that advice does not even consider a persons total financial picture - investments, annuities, a pension.
I’m ready for the 🔻 just show me the real value of the trade off using unsecured money now for the possibility of higher monthly income several years in the future.
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Rehashing the age 70 thing. I’ve tried to avoid this, but it’s like giving up looking for something you lost. Tell Dear Dickie what is it that he doesn’t get about SS at age 70?
I realize I am on the outside looking in, out of sync, ignoring “expert” advice and rehashing the subject, but I can’t help it. I need help here.
I simply cannot understand why anyone living off their investments would use those investments to live on in favor of delaying social security until age 70.
It seems to me that unless there is a gigantic pool of money they’ll never need, they are taking an unnecessary risk using more of their investments sooner rather than later. I think they call it opportunity cost. I used three AI apps and they all had the usual arguments for and against delaying to age 70. They were consistent about taking benefits when you need the money to live on and cautioned about using other assets just to delay.
Yes, I get some of it. A higher monthly SS benefit and with it a possible higher spousal survivor benefit. But part of the value there is the age difference between spouses. Assume age 70 is achieved, the life expectancy for males: is approximately 14 to 15 years. for females: approximately 16 to 17 years. Unless there is a significant younger age difference for a surviving spouse, there is not much time for the higher benefit to be needed - statistically. And you can provide for survivors in other ways.
Is a retirement plan going to succeed or fail based on the higher monthly Social Security benefit starting at age 70? Is that more important than accumulated assets and sustaining, if not growing them, for an extra three years or so? What if the person wants to retire earlier than FRA, is the extended period using more investments before age 70 still valid?
I read these words on Open Social Security “The strategy that maximizes the total dollars you can be expected to receive over your lifetimes is as follows:” Sometimes it is age 70, sometimes not, but I say “so what?”
Why would that be my goal? Besides, that advice does not even consider a persons total financial picture - investments, annuities, a pension.
I’m ready for the 🔻 just show me the real value of the trade off using unsecured money now for the possibility of higher monthly income several years in the future.
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August 19, 2025
The Most Cited Websites By AI Models
When we ask a question of ChatGPT or Gemini or any other AI LLMs we may wonder about the source of the information contained in the answers. I recently read an article about this. LLMs rely on user-generated content and as we know, not all of these web based sources are accurate and so, neither will the answers be.
“According to an analysis by Semrush, LLMs like ChatGPT reference Reddit and Wikipedia the most for facts. For geographical data, LLMs frequently cite Mapbox and OpenStreetMap.”
Here’s a breakdown of citation frequency:
Reddit.com 40.1%
Wikipedia 26.3%
Youtube.com 23.5%
Yelp.com 21.0%
Facebook.com 20.0%
Amazon.com 18.7%
Tripadvisor.com 12.5%
Openstreetmap.com 11.3%
Instagram.com 10.9%
Mapquest.com 9.8%
Walmart.com 9.3%
Ebay.com 7.7%
Linkedin.com 5.9%
Quora.com 4.6%
Homedepot.com 4.6%
Yahoo.com 4.4%
Etc.
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A Record Journey
I went on a little shopping spree last week for some new tunes, ordering some records from a reputable online music store. Like a little kid who just ordered PlayStation 5 from Amazon, I’ve been anxiously tracking my order on the fine United States Post Office website.
I cannot make the following story up.
On 8/11 I placed my order.
On 8/12 the retailer delivered my records to the USPS origin facility in Louisville KY.
So far so good.
On 8/13 the USPS sent my records to their facility in Pontiac MI, a 390 mile drive from Kentucky. About 300 miles into that Kentucky to Michigan drive, my records passed within just one mile of my house. But like Halley's Comet passing by earth, it may as well have been 39 million miles away.
A day later, 8/14, the Post Office sent my tunes 90 miles south to the postal facility in Toledo, about 10 miles from me as the crow flies.
Oh boy I thought, I’ll get my records days before the estimated delivery day, 8/18.
Then on 8/15 the Toledo processing center sent the records back up I-75 to a place called Capac, Michigan, not to be confused with C-Pap or Z-Pack Michigan. Capac is another 113 miles from Toledo, and some 48 miles north and east of their Pontiac visit two days earlier.
On 8/16, the Capac post office sent my records to the Detroit postal facility. I was feeling confident, as they had finally stopped traveling north, away from my Vinyl Resting Place, (this is what I call the room where my record player lives).
At 9PM, still Saturday 8/16, my confidence was shattered, as my music had just been transported north to (drum roll) Pontiac, Michigan, again. I was beginning to feel like Don McLain when he sang “the day the music died”.
At each one of these stops, I assume someone had to pick my package up and scan it in order to provide me with the tracking information, as well as to know what to do with it. My records, along with scads of other freight, were being shifted among various trucks en-route to a myriad of destinations. I was recalling the American Tourister ads from 1980, you remember, when the baggage handler was a Gorilla who destroyed the suitcases. I sure hoped that the box my records were packed in didn’t look like that.
The estimated delivery date was 8/18, but the tracking tool was telling me that my musicians remained locked in the back of a truck still in Pontiac, MI.
The trail seemed to have gone cold. Should I consider hiring Jim Rockford or Thomas Magnum PI before it’s too late. If Stephen Hawking were here, perhaps he could explain this black hole that has eaten my records.
Then at 12:04AM on 8/19 my phone pinged. A text from the Post Office that my package was now in route to its next destination. My heart was beating faster; could the next stop be back in Toledo?
The next thing I remember was a furry bump to my head around 5AM as Sophie the wonder cat alerted me to two missed texts. The first came at 1:52AM when the tunes arrived in Toledo, and another at 4:58AM when they were transferred to Monclova, my home town.
Things were happening fast. A text came at 6:22AM informing me that they were finally out for delivery. And a final text at 10:35AM declaring that Patsy, Johnny, Toby, and George were outside my front door, patiently waiting for me to let them in.
My fears about the gorilla baggage handler abated, as the package was in fine condition.
Both Google Maps and Waze tell me that it’s a 300 mile drive from Louisville to Monclova, but as far as I can tell, my records have traveled about 700 miles.
So the lesson and the moral of my story for you, my HumbleDollar friends, is to never get driving directions from the United States Postal Service.
Have a great day.
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