Jonathan Clements's Blog, page 35
July 21, 2025
Double FOMOitis
In reality, many of HumbleDollar’s financial debates mainly matter on the margin – Social Security claiming, taxes, tariffs, interest rates, Medicare premiums, Roth conversions, annuities, diversification, dividends, specific fund selections, etc. We seniors have experienced the most amazing 15 years of stock market appreciation ever, and having a healthy asset allocation to stocks has been hugely beneficial. At this point, only a Japan-like decades of market pull-back could devastate the comfortable financial position of those (like most HD readers) with invested assets – FOMO for not selling. Yet, the economy, earnings, technology development, consumer spending, employment, GDP, and stock valuations all continue to grow nicely, and it is always best to stay invested for the long-term – FOMO to sell.
Anyone else likewise suffering a case of double FOMOitis?
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100% Base Pay Replacement: What Does It Mean?
Generating a reliable source of income is one of the most important, and often challenging, parts of a successful retirement. Those of us fortunate enough to have a decent defined benefit pension have a leg up on this. Combine this with an inflation protected social security benefit, and some savings, and a retiree has a chance at a modest, yet comfortable retirement. I’ve seen this firsthand. My in-laws were a truck driver and a part-time registered nurse. They combined a teamster’s pension, a small nursing pension, and 2 social security benefits, along with a 403b plan, and lived a comfortable retirement.
One of HD’s most esteemed authors frequently advocates for a retirement income goal of 100% base pay replacement in retirement. This was repeated recently in this post. There have been lively discussions on this site about this in the past. I’ve wondered if one of the sources of disagreement in the past was the use of the term “base pay”, but I’ve never seen it discussed. Today’s post resurrected that thought, and I think it may be worth exploring. Here are a few questions that I have.
In my working career, most professional’s salary was the same as their base pay. At one point I managed more than 500 engineers and scientists, and had access to the payroll data for 1000s of employees. The vast majority worked for a salary, with occasional bonuses or awards. But they were small in comparison to the salary. In my experience, base pay and pay are the same thing. I’m aware of industries – finance, tech start-ups, sales – where pay is tied to business performance. In my companies that was limited to the executive level. What is the experience of others? RDQ has told us he worked for a large utility. Were bonuses a significant part of the compensation for the majority of employees?
How do you define base pay for a couple with both working? My wife was able to work part-time as a nurse while our children were growing, and transitioned to full-time as they finished high school and went to college. She progressed well in her career and her last 15 years she developed and managed multiple surgery centers. Her salary increased with her added responsibility, and helped us pay for college, purchase a beach home, and save significantly towards retirement. In the last decade of work, we were able to max out retirement account contributions and save beyond that. Should you replace the income amounts that were directed to qualified retirement savings accounts while working?
Consider the new retiree in the table below. She retired form her position on 12/31/2024. She has no pension, but saved diligently in her employer’s 401k, an after-tax savings account, and a Roth IRA. How should she set up her income plan starting Jan 1, 2025?
Item
Data
Facts
Personal
Female, single
DOB
Jan 15, 1960
Retire
Dec 31, 2024
Residence
PA
2024 Income
Salary
$100,000
401k Savings
$30,500
HSA Savings
$5,150
Payroll Tax
$7,650
Federal Tax
$5,669
State Tax
$3,000
Net Pay
$48,031
Assets
401k Balance
$1,200,000
After-tax Cash
$100,000
Roth IRA
$200,000
SS Benefits
Monthly Benefit
65 (1/15/25)
$2,115
67 (1/15/27)
$2,558
70 (1/15/30)
$3,038
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100% Base Pay Replacement – What does it mean?
Generating a reliable source of income is one of the most important, and often challenging, parts of a successful retirement. Those of us fortunate enough to have a decent defined benefit pension have a leg up on this. Combine this with an inflation protected social security benefit, and some savings, and a retiree has a chance at a modest, yet comfortable retirement. I’ve seen this firsthand. My in-laws were a truck driver and a part-time registered nurse. They combined a teamster’s pension, a small nursing pension, and 2 social security benefits, along with a 403b plan, and lived a comfortable retirement.
One of HD’s most esteemed authors frequently advocates for a retirement income goal of 100% base pay replacement in retirement. This was repeated recently in this post. There have been lively discussions on this site about this in the past. I’ve wondered if one of the sources of disagreement in the past was the use of the term “base pay”, but I’ve never seen it discussed. Today’s post resurrected that thought, and I think it may be worth exploring. Here are a few questions that I have.
In my working career, most professional’s salary was the same as their base pay. At one point I managed more than 500 engineers and scientists, and had access to the payroll data for 1000s of employees. The vast majority worked for a salary, with occasional bonuses or awards. But they were small in comparison to the salary. In my experience, base pay and pay are the same thing. I’m aware of industries – finance, tech start-ups, sales – where pay is tied to business performance. In my companies that was limited to the executive level. What is the experience of others? RDQ has told us he worked for a large utility. Were bonuses a significant part of the compensation for the majority of employees?How do you define base pay for a couple with both working? My wife was able to work part-time as a nurse while our children were growing, and transitioned to full-time as they finished high school and went to college. She progressed well in her career and her last 15 years she developed and managed multiple surgery centers. Her salary increased with her added responsibility, and helped us pay for college, purchase a beach home, and save significantly towards retirement. In the last decade of work, we were able to max out retirement account contributions and save beyond that. Should you replace the income amounts that were directed to qualified retirement savings accounts while working?Consider the new retiree in the table below. She retired form her position on 12/31/2024. She has no pension, but saved diligently in her employer’s 401k, an after-tax savings account, and a Roth IRA. How should she set up her income plan starting Jan 1, 2025?ItemDataFacts PersonalFemale, singleDOBJan 15, 1960RetireDec 31, 2024ResidencePA2024 Income Salary$100,000401k Savings$30,500HSA Savings$5,150Payroll Tax$7,650Federal Tax$5,669State Tax$3,000Net Pay$48,031 Assets 401k Balance$1,200,000After-tax Cash$100,000Roth IRA$200,000 SS Benefits Monthly Benefit 65 (1/15/25)$2,11567 (1/15/27)$2,55870 (1/15/30)$3,038The post 100% Base Pay Replacement – What does it mean? appeared first on HumbleDollar.
The Ties That Bind
This post explores another aspect of Dr. Lefty’s exceptional article of July 10, 2025, “Estrangements and Estates”. Specifically that of Reconciliation. People are just beginning to talk about estrangement even though one out of four families —or 30% of American families have an estranged member, as cited in Dr. Lefty’s article. That’s a pretty big number.
When someone severs ties, it’s not about a day that went wrong, or even one event that happened. It’s an accumulation of things that pile up and fester, and some trivial misunderstanding that no one even remembers can trigger an estrangement.
There are many reasons for an estrangement. I think we can agree that toxic relationships might include drug abuse, violence, mental health issues, involvement in unlawful activities and so on. But there are other intolerable situations such as certain personality disorders that can drive a person to put an end to the relationship. Difficult childhood histories, abusive parenting—These get carried over into adulthood. Now, unfortunately, we also have polarizing political views. Business deals gone wrong or loans un-repaid are also archetypal. The list goes on.
If reconciliation is your goal, both parties may have to settle for a different relationship. You can go home again but it may well be a different home.. The other person may never live up to your values or your standards. The question you need to ask yourself is do I really want this person in my life. If the answer is yes, remember It takes two to reconcile.
There has to be enough love on both sides for the reconciliation to work. Love is fundamental to reconciliation. You may not forget but you can forgive. Love is a word that is bandied about. Too many people have a skewed idea of what love is—a misunderstanding of the different types of love and its deep meaning. True love has strength and resilience. It “bears all things”. But studies have shown that each of us has a different capacity for forgiveness.
There is a secrecy attached to estrangement. Because of the shame and taboo nature of the subject, people are ashamed to express their feelings. The emotional pain and confusion it brings make it very difficult to talk about. People view estrangement as isolating. They tend to think there is something wrong with your family. There is a stigma attached to it.
When people look back at what went wrong they have divergent views of the past. They can’t even agree on who said what or what actually occurred. If a reconciliation is to come about, It may be best to start with the present and work from there.
Reconciliation will never bring back the relationship to the same level it was, but it still may be good to be back in the relationship—and who doesn’t like to think it’s never too late. Family membership is forever. If reconciliation is on your mind, don’t wait another day. I write from experience. The first sentence of a short message can be “I love you.”.
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Portfolio Shift: It’s Really Different This Time
The catalyst, somewhat surprisingly, was a 2024 memo: Howard Marks’ “Sea Change.” Marks—a legend in the investment world—made the case that we’re living through only the third true inflection point in markets since the 1970s. He highlighted structural shifts: the end of a four-decade era of declining interest rates, rising inflation, and a reversal (or at least stalling) of globalization. The playbook investors used from 2009 to 2021 may no longer apply.
I once relied on Treasuries as my security blanket. More importantly, the relationships I once counted on—stocks and bonds moving oppositely, Treasuries as a “risk-off” haven—seem less reliable now. Instead of cushioning equity losses, bonds have occasionally fallen in tandem with stocks, particularly in inflationary shocks. That safety net? It’s not what it used to be.
So, why international stocks? For one, they’re cheaper. And now I’m seeing more evidence to support the shift. A recent Morningstar article breaks down research showing that valuation expansion—the increase in the price investors is willing to pay per dollar of earnings—has driven most of the U.S. market’s gains since 2008. Fundamentals took a backseat. From 2008 to the end of 2024, the CAPE ratio for U.S. equities more than doubled. In contrast, the MSCI EAFE index (which tracks developed markets outside the U.S. and Canada) saw its CAPE rise just 36%. Historically, when valuations double, markets often underperform in the following decade. It’s a sobering correlation.
Are you sticking with the old playbook? Or have you made similar moves? I’d love to hear how the HumbleDollar community sees the future of investing—especially when we tune out the political noise.
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I’ve decided to put my opinions to good use. I’m going to become an advice columnist. You know, like Ann Landers, Dear Abby, Miss Manners.
To keep it friendly I’m thinking of going by Dear Dickie.
Think of all the good I could do encouraging people to give up their budgets and spreadsheets and aim for 100% base pay replacement in retirement, including use of an immediate annuity, dividends and interest. I’d tell them to make sure they leave a modest legacy if possible, but to travel the world or at least the US.
Here is a sample of how I envision my column.
Dear Dickie, do I need a budget? I can’t seem to save. Signed Frugalist
Dear Frugalist: nah, a budget won’t help. Get your act together, discipline is what it’s about. Stay out of the snack and prepared meals aisles, you don’t need another tattoo and make your own coffee in the morning.
Dear Dickie, my spreadsheet says I can retire at 73, but I want to retire at 53, what can I do? Signed Dreamon
Dear Dreamon, that’s easy, next time throw me a fast ball. Change your investment return assumptions and your life expectancy until it does work. You might want to check out crypto. I hear that’s a solid investment.
Dear Dickie, I’m retiring soon and plan to relocate to Hawaii, any thoughts about this. Signed Alone
Dear Alone, I’m assuming the move is not to save money, but more like getting away from family and friends. Good idea, not many of them will schlep 12 hours to visit. Have you considered living full-time on a cruise ship?
Dear Dickie, I have $1,000,000 saved, can I retire? I’m 45. Signed Early
Dear Early, No doubt you can retire, but whether you can eat at the same time is up in the air. Have you considered a monastery?
Dear Dickie, I hear a great deal about living within your means. Does that include making minimum monthly payments on all my five credit cards? Signed Livinitup
Dear Livinitup, let me think about that. If your means includes bankruptcy and poverty, I think it does. Seriously, cut back dude, your means ain’t what you think it is. I’d stop using those credit cards - right after the next family trip to DisneyWorld.
Dear Dickie, my coworkers keep telling me to save in our company 401k, but I think I’m better off investing on my own, any thoughts? Signed Will Besorry.
Dear Will, I have a bridge and ten acres of slightly moist land for sale at bargain prices. Not sure it will beat that 50% company match on your contributions to the 401k though. Your coworkers may be on to something.
Dear Dickie, I want to be sure my investments are diversified so I’m using large cap index funds from Fidelity, Vanguard and Schwab. Is that okay? Signed Clueless
Dear Clueless, let me put if this way, you are about as diversified as buying Lays, Cape Cod and Wise potato chips. You need to add some Fritos and Cheese Doodles.
Dear Dickie, should I start my Social Security at age 62? Signed Earlybird
Dear Earlybird, that’s a tough one. How long do you plan on living and with how much money? I’m going to refer you to an engineer with serious spreadsheet skills.
So there you have it, the future of modern advice columns. Any questions?
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The Unsettling Relief of Saying Goodbye
Should you celebrate your release from the hard years of struggling to care for a loved parent when their passing finally arrives? I struggled with this emotionally conflicting thought for quite a while through the spring of this emotion's awakening.
I soothed my conscience over time by thinking about my own children. I came to realize that I would not want them to endure such hard emotional caregiver duties when my time comes. Although I'm sure they would embrace it with commitment, it's not the path I wish for them. This gave me the realization that my own mum would have hoped not to have this gladly taken burden thrust upon me. This revelation helped me come to true terms with myself and the unsettling relief of embracing my mum's passing.
Social expectations around grief gently corral your thoughts away from feeling this relief, but I believe it's an important issue that needs more understanding and exploration. The unfortunate reality is that many of our age group are going to face this uncomfortable emotional experience. Forward thinking and discussion can help you deal with this possible guilt-inducing turmoil during an already difficult time.
I hope my thoughts don't cause offence. I only want to share an emotional journey to acceptance—the acceptance that relief can coexist with the deep loss of a beloved parent.
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July 20, 2025
How do I scam thee? Let me count the ways
How about “airplanes”? Those chain letter type scams. I actually fell for one of those. I felt so bad that I refunded the people that got in below me.
The Iraq Dinar? I know two people who have died waiting for the currency to revalue, and another guy who still believes it’s going to happen.
The Nigerian Prince scam. A friend of mine lost a couple $k on this one. She was afraid to tell her husband. I don’t blame her.
The Grandson Scam. One of my sweetest widow clients lost about $25K on this. She may have been old, but she was not someone who I thought would be vulnerable. She explained to me in minute detail how the scam unfolded. You think you are not vulnerable? Think again.
Various Romance Scams. A friend not much older than me, somehow was befriended by a beautiful South African girl (he showed me texted pictures), who inherited gold bars from daddy. She just needed some cash to get them out of storage. She would then send them to his local police department, in care of him, and then fly into the USA to live happily ever after with my pal. Even after I showed him evidence and history of the fraud, he didn’t believe it. His daughter got hold of his phone and deleted its history, but he eventually found his South African girlfriend. The only consolation is that he has no savings to get scammed out of, just what he can spare from his SS.
Fake law enforcement scams, IRS agent scams, turnpike toll scams, hacked computer…….
Possibly the most common scam of all; theft by family members.
It’s a never ending battle. I feel like we’re chasing our tales. But me, I’m way too smart to fall for any of it. NOT.
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Oh Dear, the Accidental Wedding Downgrade
My main task before the wedding, anticipating significant spending, was to transfer extra funds to my debit card. Understandably, or so I thought, I forgot. My wife, Suzie, disagreed with my assessment, suggesting I was simply a bit "daft." The result of this oversight? I was extremely intentional with my spending throughout the three-day event.
I'll readily admit this wasn't a hardship; it was a wedding with ample free food and a reasonable amount of complimentary drinks. However, this experience prompted me to consider lifestyle creep around life's smaller pleasures. I was surprised by how pleasant the house wines tasted. Was the wine I usually chose really worth twice the price? I genuinely don't think so. And what about that tub of luxury ice cream—does it truly taste that much better? Then there's the big one: artisan roast coffee. Would your taste buds really protest a downgrade?
So, what are your thoughts? Do you have any ideas or tips for the best "downgrades" for life's little pleasures that actually work? Or maybe a downgrade that was a bit of a disaster?
And before you wonder, I didn't have a credit card with me, possibly because I'm a bit daft!
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Oh Dear, The Accidental Wedding Downgrade
While attending a recent wedding, something rare happened to me—an event so unique, I'd say it hasn't occurred in at least thirty years.
My main task before the wedding, anticipating significant spending, was to transfer extra funds to my debit card. Understandably, or so I thought, I forgot. My wife, Suzie, disagreed with my assessment, suggesting I was simply a bit "daft." The result of this oversight? I was extremely intentional with my spending throughout the three-day event.
I'll readily admit this wasn't a hardship; it was a wedding with ample free food and a reasonable amount of complimentary drinks. However, this experience prompted me to consider lifestyle creep around life's smaller pleasures. I was surprised by how pleasant the house wines tasted. Was the wine I usually chose really worth twice the price? I genuinely don't think so. And what about that tub of luxury ice cream—does it truly taste that much better? Then there's the big one: artisan roast coffee. Would your taste buds really protest a downgrade?
So, what are your thoughts? Do you have any ideas or tips for the best "downgrades" for life's little pleasures that actually work? Or maybe a downgrade that was a bit of a disaster?
And before you wonder, I didn't have a credit card with me, possibly because I'm a bit daft!
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