Jonathan Clements's Blog, page 27
June 26, 2025
Boglehead Conference
Thanks,
Jackie
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Ninety Nine, I mean Eight Retirement Tips
It makes for a brisk though useful read as every retiree could benefit from going over the basics every now and then. Though if you find that you’re too busy for 99 tips, I’ll review the more interesting ones.
#3. “Establish a ‘trusted financial coach’ relationship.” The idea that “it’s helpful to have someone you can trust help you evaluate financial decisions,” and maybe Fisher Investments can be that someone. I don’t have anyone that fits this bill and am thinking I’d ask Richard Quinn. As we’ve never met he may not be interested, but I have a feeling he’d be more than willing to “tell [me] what [I] need to hear and not just what [I] want to hear.” Also, he seems rather trustworthy.
#16. “Choose a long-term financial goal.” The option of “spend it down and end with nothing,” is specifically mentioned and is specifically appealing. Though what isn’t mentioned is the how. I really like the idea of instituting an investment plan that upon death has me owing the government a considerable amount of money. Unfortunately, my enjoyment would be greatly limited as I’d be constantly worrying, “What if I live another 10 years?”
#18. “Beware of Annuities.” I just finishing eating my leftover steak from a recent “Complimentary Dinner Event,” where I was also warned about “complicated, difficult to understand contracts” written by commissioned salesman. If seems that the wealth advisor playbook now includes a play called “Crap on the annuity.”
Since my wife and I both will have social security and pensions, we are well annuitized, though for others a single-life annuity may make some sense. So much so that Fisher actually recommends them on their website.
#19. “Consider passive management carefully.” It then goes on that “you (or any money manager) can’t consistently beat the market” is a fair assumption, but that a money manager can prevent a panicky client from selling “after the market falls.” While there is some logic to this, it makes it seem that I’m paying someone 1% of my assets to be a psychoanalyst and not a financial analyst. It is rather resignedly mentioned (much) later in tip #92 that “If you’re going to buy funds, buy low-cost index funds.”
#52. “Travel early in your retirement.” The wisest analysis ever to come out of Fisher Investments. I retired early, forgoing company sponsored health insurance to make a Grand Tour of Europe followed by circumnavigation of the globe. I have no regrets as if I waited I’m not sure it would have been as fun or if I would have done it at all.
#81. “Roll over your 401(k).” It then goes on to explain how to roll it over to the oddly described “new retirement account,” assuming it as a given. Well, I’ve been retired for a number of years and have not rolled mine over yet.
Now it seems to me that the only reason to roll it would be due to cost (too much) or investment options (too little). I have my ExxonMobil 401(k) with Voya, which limits my options to the rather blandly named “Equity Units, ”Extended Market Units,” and “International Equity Units.” I personally don’t mind these few options, mostly due to the expenses on my Equity Units running around 0.0025%.
I’m going to stick with my 401(k) for now, even though it limit’s my ability to invest in the Invesco HSBC GIF Singapore Dollar Income Bond (HSSDAM2 LX), Impax Ellevate Global Women's Index Fund (PXWEX), or the Mills Music Trust (MMTRS).
#83. “Look for ways to economize without changing your lifestyle.” This makes a lot of sense, not only for retirees but those currently employed. The tip though focused solely on “Measure laundry detergent. You’re probably using a third more than you need. That’s about $20 per year going down the drain.” While they might really be on to something, I decided it would be wise not to share it with my wife. If your spouse does all the laundry without complaint I recommend you do the same (I’m thinking of sharing this idea in my brochure “99 Marriage Tips”).
#88. “Know your net worth, but don’t obsess over it.” Finally, something besides travel I can whole heartedly agree with. The balance of the tip focuses on how calculate it (Assets – Labilities) and not how to avoid obsessing about it. It could have used a little more input from the psychoanalyst in tip 19.
When I was working I used to calculate it every month (except during the Great Recession), but since I retired and have all the time in the world, I can’t be bothered. I wish I could let you in on my epiphany, but I really have no idea why.
That’s it for now though, #53. “Try a cruise,” #17. “Establish an investment benchmark,” and #72. “List your accomplishments,” could be grist for a future article.
And Richard, let me know either way.
If you ever read anything written by Ken Fisher, you’ll quickly realize that as much as he likes making money, he likes making puns even more.
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Quinn asks. What is your experience or expectation for a change in spending upon retirement?
Usually the top two are no more mortgage payment or saving for retirement followed by commuting and other work related costs, less driving hence less gasoline, less spent on clothes. Some articles mention no longer paying life insurance premiums, less dining out and fewer subscriptions.
Some of these may be significant and others not so much. Certainly if a mortgage is paid off at retirement that is a big reduction and no doubt most will see a drop in their savings rate especially if saving was a significant percentage of income.
On the negative side we are told we may see health care spending increases, more travel spending, higher utility bills because you are home more, home maintenance because you can’t do as much yourself and support for children and grandchildren.
My personal experience was no significant overall change in spending upon retirement because our mortgage was finished years before, our health insurance premiums increased significantly, I had no commuting costs, we wore casual clothes at work the last few years. Our travel costs increased. My payroll saving rate in the 401k was modest and is nearly the same now as a percentage of income while spending on family increased significantly. We eat out more.
So, overall what has been your experience or what does your spreadsheet predict will happen? 😉
Noticeable decrease in spending/expenses, about the same or increased spending - including discretionary spending?
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My Dream: Derailed by Data
The occasional heated posts directed at a certain esteemed, humble dollar contributor, regarding his disdain for spreadsheets, always amuse me. While I find them entertaining, they sometimes become a bit uncivilized. I actually sympathize with his views, and my own use of spreadsheets is quite sparing. I believe that common sense, rule-of-thumb heuristics, and an individual's intimate knowledge of their own circumstances are more than sufficient for everyday budgeting. However, I do construct the odd spreadsheet, very occasionally.
My latest foray into spreadsheet creation came from a rambling discourse with myself when a particular thought piqued my interest. Suzie and I have set up fixed annuities to the limit of our 0% income tax bracket. What if we took the rest of our income needs from after-tax accounts for the next 10 years, paying absolutely no personal taxes? This seemed like a splendid idea! "Good old brain," I thought, "you've done me proud!" The more I considered it, the more I liked it. I reasoned that the money saved from not paying taxes would compound over the timeframe, resulting in an excellent outcome. And paying no tax for ten years? Who wouldn't love that? I felt very pleased with myself for coming up with this strategy.
Over the next few days, I decided to script a spreadsheet to get a feeling for our potential savings. After much brain activity, I completed the spreadsheet and input all the required information. To my dismay, the computer said no. This was devastating to my dreams of a tax-free decade and my desire to snub the tax authorities. It turns out we would be approximately 10% worse off over a 30-year timeframe if we optimized for ten years of zero tax.
So I guess it shows that even my most splendid ideas need a bit of a kicking by the dreaded spreadsheet of doom.
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Spend Nothing by Jonathan Clements
This frugality didn’t come naturally. I wasn’t a “born saver.” Rather, I had no choice. Within a few years of graduating university, I found myself married to a PhD student and raising a family in one of the world’s most expensive urban areas. On my junior reporter’s salary, scrimping and saving were the only options.
But I found I enjoyed it. In fact, it felt like a game. I loved watching my financial accounts grow and the mortgage balance shrink. I got a thrill out of sending $100 to one of my Vanguard Group mutual funds and then receiving the confirmation in the mail. Saving money brought me more pleasure than anything I could imagine buying.
In those early adult years, we still took vacations, but they usually involved staying with family. I treated myself to foods I loved, though my tastes were hardly haute cuisine. We’re talking pizza, sub sandwiches and Chinese takeout.
I didn’t aim to save a target sum each month. Rather, I just saved as much as I possibly could. I’d max out my 401(k) and fully fund my IRA. If any extra money came my way—a health insurance reimbursement, payment for a freelance article, an advance on a book—it got salted away. For any money that came into my hands, saving was the default choice.
This was partly made possible by thriftiness. Every weekday morning, I’d bring my breakfast and a thermos of coffee to work, and sometimes lunch as well. I was slow to buy new furniture and new clothes. I rarely ate out. To improve TV reception, I eschewed cable and instead got a handyman to mount an antenna on the roof, and then supplemented that with occasional video rentals.
But the real key to my high savings rate was the modest home I lived in. The house that my wife and I bought in 1992 was less expensive than we could afford. I kept that house after we divorced and ended up living there for almost two decades. I never particularly liked the place, but the modest monthly payments meant I was able to save great gobs of money.
I didn’t track my expenditures and I never had a budget. There was no need; I knew I was spending far less than I was making. Was I socking away money at a pace that would impress FIRE (financial independence-retire early) adherents? Perhaps. But I never calculated my savings rate and didn’t hear about the FIRE movement until years later.
If all this sounds a little manic and obsessive, it likely was. I certainly wouldn’t recommend my “save every penny possible” approach to others. But even now, I have no regrets. I’ve come to believe the best thing money can buy is a sense of financial security. Those years of saving like crazy quickly brought me that sense, and I soon stopped worrying about money and I eventually stopped thinking about how I spent.
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June 25, 2025
Extreme Frugality: It Better be Fun
I was watching a TV program this afternoon about a couple living really frugal lives, all so they could escape their former high-pressure jobs. And really? I just don't get why people would choose that. It didn't seem appealing to me. The thing that kept going through my mind was how pressurized their new, "improved" lifestyle seemed – always looking for bargain clothing, short-dated discounted food, hustling for money to pay the bills. Why not just consider a part-time job with less pressure? Then they could live a little less frugally. But I guess everyone has their own values. I'm not here to judge, and I truly hope they're happier within themselves.
But it did get me thinking… again!
It would make two great new hobbies, and I believe it could save me a fortune. The goal? To invest every penny saved into crypto. I'd be getting an education in this new investment without taking any risk or crying a single tear when it inevitably goes to zero. I'm calling it extreme frugality for crypto education and fun.
It all starts with the little things. When my cereal pack is empty, I'm now saving all those tiny crumbs at the bottom that nobody else wants. I'm not exactly sure what I'll do with them, but I'm sure YouTube will have an answer! Toothpaste tubes? Oh, they're getting squeezed with vice-like vigor to extract every last bit. And if there's a stubborn bit of shampoo left, I'm adding water and shaking it like a maraca to get every single drop. Truth be told, I already do the last two things so I'm really only upping my game.
From now on, even my takeaway orders are fair game. Those tiny sachets of ketchup and soy sauce? They go straight into a dedicated condiment cache – no more buying full bottles! I'm even drying out teabags for a free second brew. Every forgotten coin down the back of the sofa, every usable twist-tie, every single scrap is now a potential crypto-funding opportunity.
The masterstroke with my potential new hobby? It's entirely optional. I can hit pause anytime it stresses me out. You might think this is a tiny bit eccentric, but I'll be the one partying in the Bahamas with the crypto bros.
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A new challenge for RDQ
Not trying to post here with an intent of bullying etc not actually specifically wanting an individual response though I think it would be of value to him. But given RDQ's repeated themes of criticising outlets he comes across for missing some vital element of personal finances like tax or being fraud like FIRE sub 50 and maintaining that any spreadsheet or budget approach to life is unnecessary or too stressful, I truly think he would benefit from trying to learn how it might be done.
So recommendations for 101 level online tools a numerical neophyte might play with to put together a basic financial plan for a new graduate starting the workforce.
Let's say we give them a starting salary of 60k and student debt of 100k. And no further handouts from parents or grandparents. Payrises will be fair and steady but no massive leaps and or stock option bonanzas.
Then perhaps if we can persuade the world's biggest hold out against spreadsheets and modelling to engage then it becomes an easier sell to younger generations. ;)
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From over the pond
I really enjoy hearing from folks in other countries. It provides a great new perspective, but it would help in the discussions to know where a person is.
When there is mention of say pensions or Social security it could mean different things around the world.
Perhaps a designation after a name would help.
JJones-Aus or UK or something like that.
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Pension Funds are Sus: A Strange Little Post From A Grandparent
I have a new job, a chauffeur no less. This involves conveying my grandson to school. I don't know how much education he receives, but on the journey, I'm certainly getting an education on the colourful language of Generation Alpha, for those not in the know that's kids up to age fifteen.
While I freely admit this post has very little traditional financial content, I would contend it holds a vital message. So, without further ado, I would like to present my newfound knowledge in the form of a short sentence you could pass on to your Generation Alpha grandchildren. If Gen Alpha follows this advice, it will certainly help their future selves.
High-fee pension funds are sus, no cap. They're often mid, not bussin', hindering your financial glow up. If IYKYK, you'd bet against them.
Shakespearean in nature, don't you think? For your convenience, I've provided an English translation below.
English Translation:
High-fee pension funds are suspicious, no kidding. They are often mediocre, not excellent, hindering your financial improvement. If you are aware of the truth, you would agree to avoid them.
So, after much 'labour' in the linguistic trenches, I've not only cracked the code of a younger generation but also (hopefully) armed them with some truly useful financial intel. And truly, passing on this kind of knowledge makes me feel a lot less guilty about hoarding my own hard-earned cash. I think my grandson would award me 200 aura but still criticise my drip…. you can work that one out yourself, consider it homework.
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June 24, 2025
A challenge just for fun from RDQ.
You list each piece of data you want, need and obtain from a spreadsheet and I’ll see if I can match it with my all online bank multi-account, single source consolidated investments approach. 😎
And yes I realize some people just enjoy spreadsheets.
No 🔻please it’s just a fun exercise.
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