Jonathan Clements's Blog, page 26

Today’s the Day!

Well, I tried to stay up until midnight to pop a cork, but it just wasn’t happening. So today I woke up as a retired person!  If you’ve read my articles from 2024 on the topic, you know this didn’t sneak up on me.

My road through the logistics of retiring from two university systems and applying for Medicare went…somewhat smoothly. I was pretty meticulous in my preparation. I attended webinars for both systems last year and put the application dates on my calendar. I had a Zoom meeting with an advisor from one of the two systems to make sure I was doing everything correctly.

My retirement application from my current/most recent employer was finalized May 15, and I’ll get my first pension check on August 1. (I just got my last regular paycheck, as we’re paid in arrears.) My Medicare application process also went smoothly, and that coverage also begins today. (I turn 65 next month, but since my birthday is on the first of the month, I got to start Medicare on July 1.)

But there’s one glitch: My retirement application from my previous university system is still not finalized, even though I submitted it on March 3. The hold-up is that I have reciprocity between the two systems. That’s a good thing, but it makes the process more complicated. They had informed me that because of this factor, my final pension calculations could take longer, so I didn’t worry about it…but then last week I realized “wait, I’m only a week out; I should have heard something.” So I got on the phone, and indeed, there was a problem, which turned out to be lack of communication between the two systems. I’ve been on the phone with both several times and messaging with the first system. They all assure me that it will get worked out and that if my first pension check from that system is late, I’ll be made whole retroactively. But it’s a nagging piece of unfinished business that’s dampening my glee a bit today. (And it’s not a small issue. This pension from my first employer is going to represent more than 50% of my retirement income.)

I guess the take-home message is that no matter how carefully you plan, something can still go wrong. But I know I’m in a position of privilege having pension income at all, so I’ll try not to worry about it too much, although I’m naturally wired for fretting.

My next task, which I may actually tackle today, is rolling over my workplace retirement accounts (403B/457) from Fidelity to my Schwab Rollover IRA (already in place from my previous job). (My husband wants/needs me to do this because of his independence audit for the accounting firm he works for.) Again, I planned for this—I spoke to a rollover specialist at Schwab, who sent me detailed instructions of what to tell Fidelity when I call them. Fingers crossed that it goes more smoothly than my pension experience!

On a happier note, we have a nice dinner out planned tonight, and the bubbly will get cracked at some point today! I’m RETIRED!!!

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Our $1000’s Of Dollars Mistake: A Lesson Learned

My wife, Suzie, and I have just uncovered the biggest financial oversight mistake we've probably made in a very long time.

Since entering retirement, we have been reorganizing our everyday finances, including consolidating our two separate current accounts (a checking a/c without a checkbook) into one for the majority of our recurring bills. During this process, we realized we were paying for three mobile phone plans, two coming from my wife's account. It turns out Suzie had always assumed my plan was taken from her account. After tracking backward, we discovered this has been happening for over 5 years and has cost us many $1000s in charges. We are currently in talks with the mobile operator's fraud department.

But this got me thinking…again! What other small, overlooked expenses can have a regular, unnoticed drain on our finances?

Our recent discovery concerning the mobile phone plans highlights anl area many of us may neglect: recurring subscriptions and forgotten memberships. Beyond duplicate phone plans, we should consider streaming services (such as Netflix, Disney+, or Spotify), unused gym memberships, software licenses, or even magazine deliveries that are no longer read. Many services frequently offer an initial "free" trial that subsequently converts automatically to a paid subscription; these charges can accumulate over long  periods.

Based on our experience, here is a practical approach to identifying and stopping these drains: Thoroughly examine all bank and credit card statements for any recurring payment. Create a simple log: service, purpose, cost. think if it's truly needed. Consolidate recurring bills to a single, actively monitored account. This makes detection easier. For annual subscription , set calendar reminders a month prior to renewal. This allows for re-evaluation and price comparison. Make it a routine to meticulously review all financial statements.

Another easy trap to fall into is once a direct debit is established, it often slips our mind, even if the service is no longer used. It's a good idea for couples to communicate openly about bills to prevent duplicates or overlooked payments. Don't dismiss small monthly charges. These can compound over time into large amounts. Don't forget credit card statements. Subscriptions often hide here, not just in current accounts. I, for example, have a free music streaming service trial coming to an end soon. This is another area to be mindful of to check because they can slip your mind. Set up reminders to give you the option to cancel.

Suzie and I consider ourselves to be very organized and on the ball with finances. This discovery has been a wake-up call that even a savvy person can make simple errors with money matters. In fact I recently read an article on this site about these issues but I think it's worth mentioning it again: The key takeaway? Be vigilant and communicate between yourselves.

 

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Beyond the Party: How Introverts Might Quietly Win at Retirement

I was reading an interesting article by Kristine Hayes, a contributor to Humble Dollar a few weeks ago. In it, she discussed her introverted nature. Since then, a thought's been developing in my mind: Could an introvert have a distinct advantage when accumulating wealth for retirement and an above-average chance of enjoying a successful retirement?

I consider myself, for want of a better description, a "closet introvert." While many people who know me genuinely think of me as the "life and soul of the party," it's largely an act. I have a mental switch I can "click on" at will to be a very sociable extrovert when the occasion requires. I genuinely really enjoy it at the time, but it drains me after hours of this charade, and I'll be looking for an "out" to excuse myself from the gathering. I'm just happier in more intimate settings, so this thought is of much interest to me.

This transition into retirement represents a significant life adjustment. However, for us introverted individuals, this may be to our advantage, allowing for a more seamless and fulfilling experience. Introverts recharge their energy through solitude. This trait would fit perfectly with the increased unstructured time retirement affords. Unlike extroverts, who might struggle with the end of work related social life, introverts often embrace the quiet for personal interests like reading, creative hobbies, or self-reflection. That preference for deeper experience with a smaller circle means we can maintain fulfilling social lives without the constant demand for extensive social evolvement.

From a financial perspective, it seems to me introverts are well positioned for retirement. There's a strong likelihood that introverted people are less driven by the need to shop until you drop thinking. Their internal mindset means they are less susceptible to social pressure to accumulate material goods or partake in the buying mentality that nowadays is so common . Their preferred activities are often inherently less costly, such as hobbies that can be enjoyed in solitude. This tendency towards less costly living throughout their working lives provides the possibility of greater savings and a stronger financial foundation for retirement.

Furthermore, their deliberate and thoughtful decision-making could extend to personal finance, making them less prone to impulsive spending and more inclined towards prudent planning and conservative investments. I have no actual proof of this idea, and it is purely the speculative ramblings of my mind; if nothing else, it perhaps gives you some insight into the daily workings of an introverted personality's thought process. But could it possibly be that an introvert has a secret edge for retirement? I hope so because I've secretly always wanted to have an edge over others!

I did try to link to the article but couldn't figure out how to.

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More Than Money: Our Holiday Home

I'm excited this morning! Why the excitement, you may ask? It stems from the fact that, for the very first time, my wife Suzie and I are decamping to our holiday home in Portballintrae, a small coastal village on the North Coast of Ireland, for the next three months. This is only possible because we're now both retired, allowing us to fully utilize the home we purchased six years ago. As we've been organizing for departure, I've been thinking... again!

While we absolutely know what a privileged position we're in to even have a second home, I've been pondering whether the opportunity cost of handing over a large quantity of cash to purchase it has truly been worth it. I could have put that money to work in one of my Vanguard accounts and seen a very healthy return these last six years; my Vanguard global tracker has had over 75% return in that time frame, far exceeding property growth! Up to now, we've probably only used it, on average, 40 days per year. It was a significant investment, not just in the initial outlay but also in the continual expenses like maintenance and utilities, which can feel like a drain.

But the memories and enjoyment we've taken from those precious 240 days of use during the last six years have been priceless. We've had so many wonderful walks along the wild Atlantic coast and cliffs, reveled in the stunning scenery, and sampled the lovely restaurants in the area. A simple example: a lovely walk to "The Nook" Restaurant right beside the Giant's Causeway, where we sit outside having cream tea with a pint of Guinness while watching all the foreign tourists disembark from their coaches. We love speculating about their life stories and commenting on their dress style. We've also hosted numerous fun and memorable BBQs with visiting friends, burnt steaks optional! Most importantly, it's provided a much-needed decompression from our normal busy lives. Drifting to sleep with the roar of the waves after a busy day provides the best sleep I ever experience.

We've also enjoyed our times with the grandchildren staying over; their favorite thing is sand tobogganing on the high dunes overlooking White Rock Beach—they think it's such an adventure! Plus, we've had the ability to loan our home to family when the cost of paying for accommodation would mean them going without a short break. On balance, I think these invaluable human experiences make it an easy question to answer... for me, yes, it was definitely worth the purchase!

I'm going to be happily busy the next few months, hopefully I will get time to post a few articles, maybe even an update on how our adventure is going…..Oh, and did I mention there's a lovely little harbour bar within 5 minutes' walk of our home? Nice Guinness there too!

 

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Dividend Days

Dividend Days

The 4th of July, my anniversary, my birthday, and Christmas light up my year, but Easter might just be my favorite day of the year. On a monthly basis, though, payday steals the show—that spark of adrenaline when dollars hit my bank account is hard to beat. Four times a year, dividend paydays bring a similar thrill, maybe even more. This is why I’m hooked on dividends.

Dividends have trade-offs, but their potential to grow over time makes them irresistible. For example, imagine I buy a stock for $100 with a 2.5% dividend, earning $2.50 in the first year. If the stock price climbs to $150 and the dividend remains 2.5% of the current price, I’d receive $3.75 annually. This simplified illustration shows how my original $100 investment now yields 3.75%—a growing payday without selling a share. In reality, dividends typically increase based on a company’s earnings, not its stock price, but this example highlights how dividend growth boosts returns over time.

My small-scale example pales next to the dividends Warren Buffett collects from Coca-Cola. In 1988, Buffett began buying Coca-Cola shares at a split-adjusted price of approximately $3.2475 per share. Back then, the annual dividend was $0.15 per share, yielding about 4.62%. Through four 2-for-1 stock splits and consistent dividend increases, Berkshire Hathaway’s 400 million shares now earn $2.04 per share annually in 2025, delivering a jaw-dropping 62.8% yield on cost. That’s the power of holding a quality stock with growing dividends for decades.

This is why dividends are my kind of payday—they reward patience with ever-growing returns. Until they don’t. :-)

My research was aided by AI.

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The Jevons Paradox

IN A RECENT INTERVIEW, Dario Amodei, CEO of Anthropic, a leader in artificial intelligence, grabbed headlines. Amodei argued that the next generation of AI systems could replace half of entry-level jobs and drive up the unemployment rate to 20%. All of this could occur in the next five years, he said.

Recent data seem to support these glum predictions. Mark Zuckerberg said AI will be as capable as a mid-level programmer by the end of this year. Microsoft announced thousands of job cuts this spring, with programmers disproportionately affected. In an announcement last week, Amazon’s CEO wrote, “It’s hard to know exactly where this nets out over time, but in the next few years, we expect artificial intelligence to reduce our total corporate workforce...”

If these data points are a sign of things to come, it would certainly be concerning. This outcome isn’t guaranteed, though. To illustrate why I see things differently, let me share a recollection from some years ago.

My father was a lawyer, and I remember visiting his office when I was a child. In hindsight, what was notable was there was no computer on his desk. There were no computers anywhere. To send correspondence, attorneys spoke into dictation machines. They then handed the machines’ miniature tapes to secretaries, who literally typed up a first draft on typewriters, using Wite Out to fix errors and carbon paper to make copies. The draft was then marked up in pen, a final copy retyped, placed in a stamped envelope, and mailed.

Because of the amount of work involved, each attorney had a dedicated secretary who spent his or her days typing and retyping documents in the manner described above. Today, everyone seems to do their own correspondence and, as a result, there are far fewer secretarial jobs. But if we look back at historical data, we see that the invention of both the word processor and email didn’t cause any noticeable increase in unemployment. Why not? For starters, transitions like this occur slowly.

Also, new technologies are rarely a net negative. Instead, they tend to create new jobs. Take a look at today’s law firm. It has far fewer traditional secretaries but significant numbers of IT people. (IT was nonexistent in the days of typewriters and dictaphones.)

The transition in office work is the most recent change, but it’s by no means unique. Years ago, many people were employed as Morse code operators. Sam Altman, founder of OpenAI, commented that in the past there were also large numbers of people employed as lamplighters who traveled the city streets each night lighting gas lamps. More significantly, farming used to be a major sector of the workforce. In 1900, 40% of Americans worked on farms. Today, it’s less than 2%.

These transitions were all significant, but none caused the sort of mass unemployment Dario Amodei forecasted. In fact, Amazon said it doesn’t expect AI to result in significant layoffs. Instead, the bulk of the headcount reduction is expected to occur through attrition—the normal course of employees changing jobs or retiring.

Amazon provides another useful data point on this topic: The company now uses 750,000 robots in its warehouses. In theory, those robots would have taken more than 750,000 jobs, but that’s not what the overall employment data show. Unemployment today is near the low end of where it’s been over the past 75 years.

How is it possible that technology has displaced jobs, and yet unemployment remains low? An economic principle known as the Jevons paradox can help us understand this. In the 1860s, William Jevons, a British economist, observed that manufacturing plants had become more efficient in their use of coal and yet, counterintuitively, the demand for coal was increasing.

The explanation: As manufacturers realized they needed less coal to produce the same amount of output, they chose to expand their businesses into new areas, resulting in the use of more coal. 

Over time, a second order effect kicked in. These gains in output led to wage increases and faster economic growth. That, in turn, further increased demand for coal.

The adoption of artificial intelligence might deliver the same positive effects, with greater productivity leading to higher wages and faster economic growth without any loss in employment.

Recent comments by the CEO of software vendor Box illustrate how the Jevons paradox might apply to AI. “AI is not replacing existing work that's being done,” he wrote, “but adding new capabilities to the organization.” Box, in other words, won’t use AI to cut costs; it will use the technology to do more. 

He adds: “This means that companies can simply now attack the kinds of problems that just never were economically feasible to solve before…. Yes, there's certainly opportunity to automate some of the work that we currently do to drive efficiency, but the vast majority of work that we will bring automation to is the work that we just never got around to in the first place.”

Interestingly, despite his concerns about employment, Amodei sees some of these same benefits. In the same interview in which he made his comments about unemployment, he also described some of the potential positive effects that AI might deliver: “Cancer is cured, the economy grows at 10% a year, the budget is balanced....”

The reality is that this is all an open question. In a May interview, economist Daron Acemoglu, who recently won the Nobel Prize for his work on economic development, argues that AI will be able to replace only a fraction of jobs. But he adds, “It’s hugely uncertain, and it’s very difficult to know because it’s a very rapidly changing technology.”

And that just may be the best way to think about AI. It’s all very new and still uncertain. While Amodei worries about a potentially negative impact, that’s just a guess. Economic history suggests it may very well go the other way.

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.

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The Illusion of Wealth

I was sitting on the deck of my holiday home, enjoying the morning sunshine and breakfast, when a deep rumble announced the arrival of an expensive, sporty car. It was my neighbour. He's a very nice man in his 40s who always dresses impeccably, with two well-turned-out kids and an immaculate wife – to all intents and purposes, a family living the dream.

Contrast that with me: I drive a seven-year-old SUV with 70,000 miles on the clock, habitually run around in shorts and T-shirts, own three pairs of trainers, one pair of dress shoes, and exactly one suit. It's obvious there's no comparison in who's "winning the game of life"... or is there?

About 18 months ago, a conversation started when I mentioned I'd just paid off the mortgage because my wife was retiring. My neighbour then spoke with pride about his ability to juggle credit cards, expertly transferring balances with 0% transfer rates. However, he also revealed a concern about his own mortgage. As is common in the UK, his rate was fixed for five years, and with two years left on his 1.25% rate, he couldn't see how he'd afford the jump to around 5%.

That nice car, the designer clothes, the immaculate facade – they all come with a hefty, often hidden, price tag. While my neighbour projected an image of success, his confession about juggling credit cards and his anxiety over the impending mortgage hike painted a different picture. This isn't just about the obvious payments for the car or the latest fashion; it's the relentless pressure to maintain a certain lifestyle. The "keeping up with the Joneses" trap is real, amplified by social media. People feel immense pressure to project prosperity, even if it means accumulating significant debt. This pursuit often takes a quiet but heavy psychological toll: the constant anxiety of making ends meet, the fear of exposure if the carefully constructed illusion crumbless, and the never-ending striving that leaves little room for peace.

I was going to offer some advice, but then I thought better of it. Who was going to listen to a guy in a scruffy T-shirt and shorts? Appearances, it turns out, can be very deceiving.

 

 

 

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A Question for our UK posters

Recently, on the Saving and Gifting thread, I listed the organizations I support: "a reading service for the blind, the local hospice, Planned Parenthood, public radio and TV, and the [retirement] community’s benevolent fund", to which I should have added Royal Oak, the US affiliate of the National Trust. I added that "having grown up in what some Americans no doubt consider a Socialist country [UK], I consider charity to be the job of the government, for which I am willing to pay taxes."

It subsequently occurred to me, that if I still lived in the UK, I would not, in fact, need to make those contributions, aside from the National Trust. The BBC is funded by the annual license fee, plus "commercial subsidiaries ". Both the routine female medical care and abortions provided by Planned Parenthood come under the National Health Service (NHS), right? What about hospice and services for the blind?

Between the NHS and very low fees for tertiary education (it was free in my day), plus at least some private pensions with COLAs, it seems to me that Brits live with a lot less stress (and debt) than Americans.

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Have you met Optimistic Callie?

Callie's 5 mind blowing facts!

I've always liked these kind of facts/research. Hope you do too!

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You Have My Admiration: A Brit’s Thoughts on US Pensions

I've been working to educate myself on the US pension system, particularly the retirement decumulation landscape. It's a challenging endeavor, but through diligent research, I'm slowly grasping the essentials. From an outsider's viewpoint, the complexity that various US administrations have introduced into this system is striking. As a UK citizen, I find several aspects particularly perplexing:

The Sheer Number and Variety of Retirement Accounts: In the UK, it's largely about defined contribution and defined benefit pensions, perhaps with an ISA. Here you have 401(k)s, IRAs (traditional and Roth), 403(b)s, TSPs, and more. Each with its own set of rules, contribution limits, and tax implications. It's a dizzying array to get your head around.

The Reliance on Individual Responsibility for Healthcare Costs in Retirement: For me, the prospect of individual responsibility for healthcare costs in retirement is, by far, the biggest and most frightening aspect. While our NHS certainly has its challenges, the idea of having to factor in potentially enormous healthcare expenses and insurance premiums as a significant part of retirement planning is a foreign and frankly daunting concept. It adds another layer of financial anxiety that many in the UK simply don't face to the same extent.

Being Forced to Take Money from Your Accounts Through Required Minimum Distributions (RMDs): In the UK, while there are rules around accessing your pension, the concept of the government dictating that you must withdraw a certain amount from your retirement accounts once you reach a specific age, regardless of whether you need the money or not, is quite alien. The idea of penalties for not taking money out feels counter-intuitive to long-term saving.

The Concept of "Decumulation" Itself Being Such a Prominent and Complex Field: In the UK, while financial planning for retirement is difficult and important, the "decumulation" phase seems less like a distinct academic discipline and more integrated into general financial advice. The emphasis on strategies for drawing down funds, managing sequence of returns risk, and navigating these mandatory distribution rules feels like a far more elaborate puzzle here.

This isn't a criticism of US citizens at all. In fact, it's my way of expressing admiration for how adept you all seem to be at navigating such a Byzantine and, dare I say, often dysfunctional system. With that in mind, I say "well done" and "hats off" to you all for coping with such a hodgepodge of legislation. You have my admiration, but I'm glad I'm not saddled with such complexity and anxiety over healthcare and pensions in my retirement.

 

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