Jonathan Clements's Blog, page 32
June 12, 2025
Social Security Personal Update
I posted on May 21 that my spouse was going to schedule an appointment with the nearby social security office and file. (There are 14 in this state, and our area population is about 1.2 million). Here is how it went.
1. Wait times on the phone can be long, but the Social Security (SS) office will schedule a call-back. G used that service.
2. She was able to schedule an appointment about 5 business days in the future.
3. She did some preliminary work on the SS website and began the registration process there.
4. She brought documents with her, including two government issued photo IDs and the checking account so she could schedule ACH (automatic monthly deposit).
5. She changed her Medicare payment from ACH withdrawal from a checking account to debit from her SS monthly payment.
6. She completed the necessary documents for a spousal benefit. One issue was she didn’t have a “certified” marriage license with her. Copies will not do. She contacted the County office in which we were married and the necessary document was Fedexed (at cost to us).
7. She decided to back-file to November 2024. This resulted in a significant lump-sum amount as a one-time payment.
8. She selected her percentage automatic withholding for IRS federal tax payment. We had pre-discussed this. There are several options, ranging from 7% to 22% withholding.
9. She switched from monthly Medicare ACH withdrawal from checking to debit the SS benefit.
So, how did it turn out?
1. The online calculator we had used when discussing when to file was very close to the actual amount. That calculator has been discussed in previous HD articles.
2. Upon receiving the marriage certificate she scheduled an appointment to submit it as evidence to SS and complete the spousal benefit forms. She got an appointment two days hence. She presented the certificate, SS made a copy and she was done.
3. Five days after the meeting her lump sum payment of benefits on her own record arrived in the checking account.
4. There was no chaos, near trauma, wringing of hands, etc. as predicted by some.
5. Overall, it was a very positive experience for G. Because of her public pension she never expected to get a stipend even though she exceeded the SS rules. SS income is a bonus for her.
6. G has been shuttling back and forth across the country for about 7 years to care for her father and now her mother who is in an Alzheimer’s facility. Ro also has a care giver 6 days a week. The travel is expensive; each trip is about $5,000 for 10-14 days of travel, and there are multiple trips each year. I’ve taken the position with my spouse that she can spend any amount necessary and I’ll deal with it in the budget. Her SS benefit will reduce any financial pressure because of this travel. Funny how things sometimes work out.
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If I Didn’t Index by Jonathan Clements
I’d allocate less to stocks. With broad market stock-index funds, I know I’ll get whatever the market delivers. If the alternative was actively managed funds or individual stocks, there would be far more uncertainty—and I’m not sure I’d have the confidence to allocate as big a portion of my portfolio to stocks. Result: My long-run returns would have been lower.
I’d spend more time on my portfolio. Picking a few low-cost, broadly diversified stock-index funds is a cinch. By contrast, trying to identify winning individual stocks and actively managed funds is a ton of work—and history tells us it’s a loser’s game.
My financial life would be more complicated. Because the performance of individual stocks and active funds is so uncertain, I’d want to hedge my bets—and that would mean owning far more investments.
I’d pay more in taxes each year. Because of their low portfolio turnover, broad stock-market index funds tend to make minimal taxable distributions each year, especially if you buy exchange-traded index funds. Buying and holding individual stocks can also be a tax-efficient strategy. What about actively managed stock funds? They’re notorious for making large taxable distributions each year, which is why these funds are best held in a retirement account.
I’d almost certainly pocket lower long-run returns. Heaps of data tell us that the vast majority of actively managed stock funds lag behind the market averages over the long haul, thanks to their fund expenses and trading costs. What about individual stocks? If folks are careful, the costs can be minimal.
Still, most investors who favor individual stocks are likely to lag behind the market averages, thanks to a phenomenon known as skewness. In any given year, the market averages are skewed higher by a minority of stocks with huge gains, so most stocks—and their owners—end up with below-average returns. What if you happen to own the year’s big winners? Count yourself among the lucky few.
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June 11, 2025
Commodities versus Gold
“Which Is the Better Inflation Hedge? Both have some merit, but one is better than the other.”
Over at Morningstar Amy Arnott posted a short article to answer the question.
Here’s a part of her analysis:
“As shown in the table below, commodities were more consistent as an inflation hedge. They outpaced inflation in all five of the periods shown, while gold fell behind in two of the five periods. Gold did excel during the two separate inflationary periods in the early and late 1970s….. It also posted strong gains during the more muted inflationary environment from September 2007 through July 2008……However, it fell behind in the late 1980s….. During the most recent inflationary spike from mid-2021 through March 2023, gold prices rose, but cumulative returns lagged the broader commodity index by about 13 percentage points.”
She delves into the reasons for this and provides a look at some of the issues.
Each of those who own the precious metal, its surrogate GLD (SPDR® Gold Shares) or other commodities has a reason. Disclaimer: I don’t old GLD, preferring the miners. I do own an energy ETF. These provide dividends and I hold them as a part of what I consider a balanced portfolio. Combined they are about 3.5% of my personal portfolio.
Since April 16 GLD seems to have settled within a range, which is about 43% higher than it was a year ago
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How are you dealing with or plan to deal with inflation in retirement? By R Quinn
Someone on HD asked if my inflation adjusted retirement income today still equaled my base salary when I retired.
The answer is a resounding no. For every dollar of base pay in 2009 I would need $1.50 today. Since my pension does not have a COLA, any automatic adjustment is up to Social Security, but that is less than a quarter of our income.
So, now I am 50% behind - no panic yet, but I am glad I didn’t start out say, with 80% income replacement. My extreme fiscally conservative attitude on this subject provided a cushion relative to our spending. Never in thinking about retirement did I consider we might spend less - and we don’t.
Our mortgages were paid off several years before retiring and while we don’t save as much, we still save mostly in the form of eleven 529 plans, and reinvesting investment earnings
Minor items that could mean lower spending in retirement have been offset by increased retirement related spending like more grandchildren and healthcare premiums which went from $157 a month for two of us before I retired to $1654 a month today. In the place of general maintenance for our house inside and out, we have a $950 monthly HOA. Frankly I think the HOA is higher on an average annual basis.
As they say, the greatest risk in retirement is longevity.
Everyone has their own way of dealing with inflation. The 4% withdrawal strategy adjusts for inflation. I will deal with inflation when I have to by first using dividends and monthly interest payments and from cash building up in investment accounts, or in the extreme using assets I hope will go to our family.
I asked Gemini how retirees deal with inflation. Many ideas, like part-time work, cutting spending, taking a HELOC, renting a room in your home and delaying SS were not appealing. Various forms of investment income were attractive, TIPS, I Bonds and dividend stocks were mentioned as was rental income.
NJ state workers naively relied on a pension with a COLA, but because the pension fund was in terrible shape, the COLA was “temporarily” suspended. That was in 2011 and still no COLA and the trust is still underfunded. A problem created by politicians and public unions.
The point is that we all need some way to cope with inflation as we live on at least a partially fixed income. I elected to deal with it in advance and 15 years later so far so good, but for many people that may not be feasible or desirable especially if it delays retirement, so they need another strategy.
How are you dealing with or plan to deal with inflation in retirement?
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June 10, 2025
Trips in your “go go” years?
We are starting to consider booking a trip for 2026. We would like to go outside the US, if possible. Some of you have encouraged me to make a post asking advice about where to go, what to do, and other things we might need to know about traveling out of country. (We do already have our passports from when we took a cruise in 2019 when we paid off our house.) So, HD friends, I am asking what kind of trip would you advise for out of the US travel newbies? Where should we research? What trip was memorable for you? Chris
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Ironman Training Update
This past weekend I did the 200k Ride To Conquer Cancer.
On Saturday we rode from Toronto to Hamilton and on Sunday from Hamilton to Niagara Falls.
I knew it was going to be hard because I had only done one 100k training ride so far this year because of the bad weather we were having.
Also I suffer from bad allergies as well as exercise induced asthma and the day before it looked like it was snowing here due to all the white fluff in the air never mind the smoke from the forest fires out west.
But like they say the show must go on and things were going ok until the 80k mark on day 2. It became very uncomfortable to ride. My arms, backside, and neck were very sore and I had trouble pedaling but in the end I managed to get it done.
With only 54 days left to Ironman Ottawa I can see a lot of riding in my future.
How this adventure will turn out is anybody's guess but I'm committed or maybe I should be committed.
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You Might Be Ready to Retire…Who Would You Rather Be?
One of my friends is hitting 73 in August and we were discussing his need to do an RMD this year. I'm older and have been doing them for some years already. Our financial affairs have one major difference; he has a significant pension and I do not have any pension. I'd say that we are both comfortable. I think he likes his situation, and I like mine.
I thought it might be interesting to create a possible scenario where two people might arrive at the same retirement income through different routes.
Joe has a pension, SS and some savings split between taxable and tax deferred (25/75). He makes around $138,000 per year.
Bill has no pension, he has SS and savings split between taxable and tax deferred(25/75). He makes around $138,000 per year.
They are the same age, are retired receiving SS. The both receive $48000 per year in SS. Joe has a $5,000/Mo no COLA pension, and takes 4% of his $750,000 savings each year to reach his $138,000 income. Bill takes 4% of his $2,250,000 savings each year to reach his $138,000 income. Of course, as Bill ages, he will have to take larger RMDs, but he can lower what he takes out of his taxable account to try to keep his income the same as Joe.
Both have a reasonable allocation to equities in their financial assets. They both own a home without a mortgage.
I suspect that Joe had some kind of government job and that Bill worked for a corporation. Bill might have had a higher income while he was working.
We might be discussing Sally and Elizabeth instead of Joe and Bill....the names are just for convenience.
So, which might you like to be and why?
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June 9, 2025
Should we envy the super wealthy? Have they taken our piece of the pie leaving us with the crumbs? Nope! By Dick Quinn
What triggered this post was a Facebook meme claiming the wealthiest 0.1% have gained $4.4 trillion in the past two years, that they have grown their wealth at the expense of average Americans and that “without them your wealth would have doubled”
When I read that, my reaction is “that’s just wrong and so what, they earned it.” I wish I was that smart. But that is not the typical reaction. Many people readily believe such a meme and are willing to bash the wealthy. I think it is simply envy. I maintain that without the super wealthy many Americans would have less wealth than they do now, and some without a job.
Given the largest asset class of the super wealthy is equities, virtually everyone can build wealth as HD readers well know. We not may be capable of starting a company or new industry and changing the way people live in the process, but we can buy mutual funds and be a 80 percenter (about $3 million at age 65). No budget or spreadsheet required 🤑
As of Q4 2024, the top 0.1% of U.S. households held approximately $22.14 trillion in net worth. This figure is from the Federal Reserve and represents the net worth held by the 99.9th to 100th wealth percentiles. The average net worth for a household in the top 0.1% was $162 million as of Q4 2024.
The top 0.1% (around 134,000 households) owned roughly 15% of America’s total wealth as of Q3 2024. Their largest asset class was equities, valued at approximately $11 trillion.
The solution is easy, create a new company in your garage, issue an IPO and give yourself 20 million shares, wait a few years and bam! you’re an equity one percenter.
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June 8, 2025
Change Lanes, Expand Your Wheelhouse, Learn Some New Tricks
Of the things I have learned from HumbleDollar, and more specifically from Jonathan, is that increasing birthrates and immigration alone won’t solve our Social Security and Medicare quandaries. People need to work longer.
I have pushed back on that idea by pointing out that for many employed in what I call the brutal occupations, working longer is easier said than done. While I stand by that sentiment, I know people who have changed lanes, expanded their wheelhouse and learned some new tricks.
I know an old plumber who got a job with the county as an inspector. An electrician who went into sales for his employer. A carpenter turned foreman. A sheet metal worker who took a job with the city rooting out un-licensed contractors. A steelworker who got a job in a supermarket's produce department. My brother became an attorney after a disability caused early retirement from the police department.
The moral of my story is just because you’re not a Rhodes Scholar doesn't mean you don’t have options. Heck, I know a guy that drove a beer truck for 30 years who ended up owning an income tax practice. Perhaps you know someone who could benefit from a little encouragement.
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When relocation in retirement is not an option, not what you really want. By Dick Quinn
We live in a small town in NJ, population 6,600. The median household income is $203,000, the median home value is $1,358,400 and the median property tax is $29,600. I feel like we live in a bubble and given these numbers are much higher than our state averages, which are third highest in the Country, I guess we do.
Between property taxes and HOA fees the minimum annual cost to live in our condo is $24,900.
We live here by choice, wanting to downsize and eliminate stairs a few years after retirement, but also wanting to stay in the same area - we live less than a mile from the house we had for 45 years. In fact, we live five miles from where I, my mother, grandparents and great grandparents grew up.
I knew long before I retired that relocating after retiring was never going to happen. Our roots and most importantly our family are here. We are very fortunate that all of our family are within an hour drive, not scattered around the country. We spend many weekends involved in family activities.
To see any significant decline in the above numbers, we would have to move out of NJ - way out. That means away from family and lifelong friends and that was never going to happen.
The other option was simply to move to our house on Cape Cod. The property taxes there are $2,800 a year, plus then there would only one home to maintain. I had that dream for awhile, but only a dream. Deep down I knew the reality.
As you see, there is a price to pay for our choices. We are fortunate to be able to make those choices, and not relying on relocation to make retirement affordable. Now you know why my views about retirement income are what they are, our expenses were not going down.
If moving to Florida or the Carolinas, as is popular in the East, or Arizona or anywhere sunny and warm is your dream, why not? Millions of seniors do just that.
From my perspective just do your best to assure it’s a real dream, not driven by financial necessity just to make your numbers and retirement date which you may come to regret.
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