Jonathan Clements's Blog, page 3

What Could Possibly Go Wrong?

"U.S. Stocks Are Now Pricier Than They Were in the Dot-Com Era
The S&P 500 has never been this expensive, or more concentrated in fewer companies" - WSJ 9/1/2025

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Summary 200 Day Simple Moving Average:As of today (September 1, 2025), SPX index 200-day simple moving average is 5959.47, with the most recent change of +2.32 (+0.04%) on August 29, 2025.Over the past year, SPX index 200-day SMA has increased by +837.72 (+16.36%).SPX index 200-day SMA is now at all-time high.

Furthermore, all of the components of Faber’s ‘Ivy-5’ portfolio are above their 10-month Simple Moving Average.

 

 

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My New Zero-Wage CEO Role

This morning, as I was drinking my coffee, I realized it was September 1st. Today, with the kids returning to school in Ireland, grandparents across the country will be taking on after-school care duties.

This got me thinking. Just after I retired and before heading to my vacation home, I had an eight-week window into one aspect of my retirement future: helping out a couple of days per week minding the grandkids.

This was a new and unique adventure that I'm looking forward to resuming in late September. My initial impressions of this new responsibility have been enlightening. Although my grandson spent part of the summer with us, entertaining him one-on-one is a different kettle of fish.

I've discovered that school drop-off is a dog-eat-dog world, where you jostle for the perfect parking space. It’s highly exciting when you spot a place right at the school gate, with envious "yummy mummies" looking on in anger. Very satisfying, and worth missing that second coffee.

Then there's soccer at the local park after school. I’m positioned in the goal while my grandson kicks the ball at me as hard as he can, seeking the perfect goal. It hurts when the ball hits me right in the leg! I've had ball-shaped bruises to prove it.

Quickly moving on from this indignity, we come to his favorite Xbox video game, Fortnite. I've mastered the basics but keep getting killed within minutes. I’m going to need a refresher course in September. My grandson thinks I'm a bit rubbish at it, but my goal is to last a bit longer before getting laughed at.

Then we have my younger granddaughter. She’s not yet experienced the joys of school but loves trying to shove plastic cups into my mouth while making me dinner with her toy kitchen. That's slightly better than having to scold her naughty doll for jumping off the couch. That gets tiring after the first 20 minutes, but I'm sure I can adapt and continue showing the correct amount of enthusiasm.

Sometimes they even quietly play together without needing my immediate attention. They seem to have a built-in radar to find me just as I'm about to read a book or listen to the news. I've tried a few distraction techniques but have been unsuccessful in finding a surefire winner. My best hope was sending them to find my wife, Suzie, but her distraction technique is much better developed and generally involves finding their "Pops"—i.e., me.

As pickup time approaches, my eyes develop a fascination with the clocks around the house. That last half-hour seems to take an age before the door opens and the call of “it's only me” announces my duty is over for the day.

Strangely enough, I look forward to the next time it's our turn to be the caregivers. It's a rewarding experience that gives structure to the day. But now that I have my own space and quiet to relax, I'm looking at that discarded Xbox, wondering if I should do my Fortnite homework and get a little bit better at staying alive. Maybe I'll have the last laugh the next time we play.

So, what do I think of it all? I'm a recently retired business owner who now has a demanding zero-wage job that actually costs me money to perform. It comes with zero career development prospects, a steep learning curve, and exhausting hours. But the rate of return on investment for satisfaction and enjoyment is off the scale. I get to help my daughter and spend two days a week bossing my grandkids around—or maybe it's the other way around? What's not to like about that, roll in mid September, I've got this covered…I think!

 

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Health Update

Numerous readers have asked about my health, and the answer is "not good." I'm not in any pain, but I suffer a lot of fatigue and brain fog, a product of two rounds of radiation, one of my brain and the other of my back. I also had a "brain incident" in August that caused me to lose the ability to read and write for a few days.

All this has made it taxing to run HumbleDollar and to correspond with readers. That complicated tax question? No, you shouldn't expect an answer. And, no, sending it along twice doesn't help.

What about all the recent nonsense over upvotes and downvotes? For goodness sake, children, let's move on. If you keep belaboring the same point, expect to be berated by your fellow readers, and a few downvotes are in order. End of  story.

How will things play out from here? I'm hoping my energy level will return. But I could also see things spiraling down, and perhaps I'll just slip away, hardly a terrible fate. If that happens, readers will be the first to know. Elaine will make sure of that.

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Comments to 8-22-2025 R. Quinn’s “Does Social Security Work?”

(Full disclosure: I used AI to help me write specific comments since I started writing them before I was fully awake)

My comment to Mr. Quinn’s very popular piece (8/22/2025) on Social Security appears below. It might even continue his discussion on a topic that affects all of us who are US citizens.

As a small business, in the late 1970s, we converted over to a 401(k) plan as a means to provide our employees with a way to save for their own retirement. Our company provided a 50% match up to 3% of their gross wages.

I started taking Social Security payments at 62 because I feared changes to the system. My thinking 18 years ago was that those in the system would remain undisturbed. I didn’t know at the time whether or not I had enough assets for retirement. Five years ago, I realized that I do.

Is there a more effective way to handle Social Security distributions to retirees?

I’m looking for a way to return to the original mission without increasing taxes or contributions, as fewer workers are supporting an increasing number of retirees with longer lifespans.  

 Original Mission: Why Was Social Security Created?

Social Security was created in 1935 during the Great Depression as part of President Franklin D. Roosevelt's New Deal. Its primary purpose was to provide financial security for seniors, individuals with disabilities, and survivors of deceased workers. During that time, poverty among the elderly was widespread, with many unable to work or support themselves after retirement. Social Security established a safety net to ensure that older Americans had a reliable source of income, reducing poverty rates and providing economic stability for retirees and their families.

—

### A Case for Separate Social Security Accounts

Requiring all Social Security payments and any investment returns to be kept in a separate account, accessible only after other assets are depleted, could enhance the program's integrity and sustainability. 

Here's why:

1.**The Reason**: Keeping Social Security funds separate ensures that they are not commingled with the retiree’s budget or used for unrelated retirement expenses.

2.**Encouraging Personal Responsibility**: By mandating that Social Security benefits are only accessible after personal assets are depleted, the program becomes a last-resort safety net. This encourages individuals to save and invest wisely for their retirement.

3.**Preservation of Funds**: Investment returns would accumulate over time, potentially increasing the solvency of the program. If these funds are untouchable until truly needed, they remain available for their intended purpose.

4.**Avoiding Overdependence**: This approach ensures that individuals rely on their own resources first, reducing the strain on the Social Security system and prolonging its viability.

---

### What Should Happen to Remaining Funds?

If Social Security funds are structured as separate accounts and an individual passes away with unused benefits, those remaining funds could be reallocated in the following ways:

A.**Survivor Benefits**: Direct the unused funds to designated beneficiaries, such as spouses, dependents, or heirs, to ensure financial stability for the family.

B. **Reinvestment in the Trust Fund**: Unused funds could be returned to the Social Security Trust Fund to support the system for future generations. This would help replenish the program's reserves and provide ongoing support for retirees, individuals with disabilities, and survivors.

C. **Charitable Redistribution**: A portion of the unused funds could be allocated to programs that assist vulnerable populations, such as low-income seniors or individuals with disabilities.

D. **Individual Choice**: Provide account holders with the option to designate how their remaining funds should be used upon their death, whether for heirs, charitable causes, or reinvestment in the Social Security system.

What do you think of the concept? What is your feeling as to what happens with unused funds, A, B, C, D, or something else?

 

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Jonathan, you’re in our thoughts and prayers

Jonathan,

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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Risky Business

NEW RESEARCH CAN help with an age-old question: When constructing a portfolio, how much risk is too much? Especially today, with the market again near all-time highs, this is an important issue.

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.

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Shifting Gears

Many times in the past I’ve proclaimed that our guaranteed sources of income fully fund our retired lifestyle. An exception was in 2023 when we had a new home built, but that was more like moving money from the IRA bucket into the real-estate bucket. 

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

The IRS recently released the 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 :

re 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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