Jonathan Clements's Blog, page 39
May 14, 2025
Breaking even? Why should anyone care? I don’t
We have discussed many times when to start Social Security and pretty much concluded the decision is personal and need based. I don’t have a problem with any of that, but what bugs me is concern over breaking even considering amount received and years of benefits.
It seems to me the monthly benefit, the income when needed most is all that matters. Since I once again find myself in the minority, I asked a neutral party, Gemini AI. Here’s is the answer I received.
“The Social Security breakeven date is important because it helps individuals understand the long-term financial implications of when they choose to start receiving their Social Security retirement benefits.”
“The Social Security breakeven date is a valuable tool for retirement planning. It provides a financial benchmark to help you decide when to start your benefits to potentially maximize your lifetime income from Social Security based on your individual circumstances and life expectancy.”
What long term implications? Valuable for what? What financial benchmark? How could it possibly matter at all? You receive benefits you need and then somewhere along the journey they stop, breakeven or not.
Are you any better off going past breakeven or worse off missing the mark. Not that I can figure.
What do you say?
The post Breaking even? Why should anyone care? I don’t appeared first on HumbleDollar.
It’s The Little Things That Scare Me Now by Dennis Friedman
When I walk, I’m constantly scanning the ground for hazards. A raised sidewalk or uneven pavement could send me tumbling—and at my age, I’m not sure my bones would hold up to the fall.
Every night before I lie down, I used to stare at the smoke and carbon monoxide detector that hung nine feet up on our bedroom wall. I’d hope it wouldn’t malfunction in the middle of the night. I knew it was too risky for me to get on a ladder and fix it if it did. It was a relief when the handyman brought it down to a reachable height.
Those lights in our high-ceiling living room have also been on my mind lately, because I’m going to need help with them too when they go out. That’s another thing I could have done on my own when I was younger.
Oddly enough, the bigger things that might worry others don’t bother me as much anymore. When inflation surged to about 9% in June 2022, it didn’t rattle me like it did other folks. My wife and I still did the things we wanted to do.
Years of saving and investing have allowed us to build a nest egg strong enough to weather the storm. I suspect the same will be true even if the president doesn’t back off on tariffs.
If we were younger and trying to build our financial foundation, it would be a different story. Back then, I’d have been worried about the tariffs. But now? It’s the thought of climbing a ladder that gives me pause, especially after an elderly friend fell off one. He now walks with a slight limp.
At this stage in life, we don’t buy much, which is another reason the tariffs won’t affect us as much as they will affect other everyday Americans. In fact, we’re more focused on getting rid of things. My wife keeps telling me I have too many tools that I no longer need. My stepson will be glad to know he’ll have fewer boxes to sort through when we’re gone.
Traveling is now our biggest expense. Even that expenditure is declining as we grow older. Big-ticket items like automobiles are not on our radar. We don’t drive that much in retirement.
Still, I feel for the young couples just starting out. They say tariffs could raise the prices of strollers, cribs, and all the essentials you need when bringing a baby into the world. These days, most of those items are made in China.
Those same couples will have other major expenses to deal with—day care, college, starter home.
Getting older shifts your focus in unexpected ways. The world’s big problems may still matter, but it’s the little things—the smoke detector, the sidewalk crack, the ceiling lights—that take up more space in my mind now.
What little things have started to matter more to you with age?
The post It’s The Little Things That Scare Me Now by Dennis Friedman appeared first on HumbleDollar.
May 13, 2025
JCX-21-25
The Joint Committee on Taxation today posted their analysis of proposed changes to the current tax code. The 400+ page document is long but certainly easier to read than the tax bill that posted yesterday 5/12/2025.
Nothing final here but I think it will give a flavor to what may be coming in 2026.
https://www.jct.gov/publications/2025/jcx-21-25/
The post JCX-21-25 appeared first on HumbleDollar.
The Silent Compounding Cost of a 1% Fee
We often hear about the power of compounding returns—how investments grow exponentially over time. But there’s a lesser-known side to compounding: the cost of ongoing financial advisor fees.
Consider a $1,000,000 portfolio growing at 7% annually. Over 10 years, that could grow to about $1,967,151—if left untouched. But add a seemingly modest 1% annual advisory fee, and your ending value drops to roughly $1,779,056. That’s a $188,000 difference.
Why such a large gap?
Each year, the fee reduces your balance before it compounds. And as your portfolio grows, the fee—calculated as a percentage of a growing total—gets larger. You’re not just paying 1% on your original investment. You’re paying it on your gains too.
Here’s how it breaks down:
Total fees paid over 10 years: ~$140,572Lost potential growth: ~$47,523Total cost of the 1% fee: ~$188,095This isn’t to say advisors don’t provide value. Many offer guidance that can help investors avoid costly mistakes. But before paying ongoing fees, ask yourself:
Am I getting value that justifies this cost?Could I replicate these results with a low-cost investment strategy?Is fee-based, as-needed advice a better fit?A 1% fee may seem small, but over time it can quietly erode a significant portion of your wealth. Understanding the compounding cost is essential to making wise long-term financial decisions.
The post The Silent Compounding Cost of a 1% Fee appeared first on HumbleDollar.
May 12, 2025
Quinn’s latest rant has serious consequences
My favorite, beautiful word is “consequences,” and how it seems to be ignored.
We tend to forget that no matter what we do, there will be a result, a reaction. There will be consequences, some intended, others not. We tend to address one problem but fail to think through possible consequences.
The best examples are at the national level. Apply a surcharge such as IRMAA and people will attempt to keep income lower.
Roth accounts were intended to increase retirement savings, but mostly help the income levels that need it the least. Only about 11% of taxpayers have a Roth IRA and those folks anticipate being in higher tax brackets in the future.
When tariff news points them higher, the market declines and vice-versa. Somebody is anticipating consequences.
Tax-free income such as from Social Security will have adverse consequences for the SS and Medicare trust funds, but seniors like the idea and don't think about the consequences.
I fear for my children and grandchildren as they will be dealing with the massive federal debt and deficits we seem not to worry about.
No property taxes for those of us over 65 means higher taxes for younger people or reduced services and funding of schools or both. But the mistaken attitude seems to be seniors already paid their share.
States like NJ seek more tax income from high earners and then have to react when those citizens leave the state.
On the personal level, making minimum payments on a credit card has dire consequences. Taking those two year olds to DisneyWorld may make you feel good - the kids won’t remember, but paying off that experience may last longer than the lines you endured.
Should a health insurance deductible apply to use of an emergency room? They are applied because the ER is frequently used in appropriately. The goal is to discourage that use, but the consequence may be a financial hardship for appropriate use.
I read people complaining that their health insurance denied a valid claim, but it turns about the claim was applied to their deductible so no claim was denied. Lower deductibles lead to higher premiums. More use of insurance means higher premiums, but few people make that connection. Frequently you can tie those consequences to lifestyle, but do so at your own risk. Many people are sure health insurance is a scam and premiums are driven by profits and CEO pay. Not true.
When policymakers seek to save money on Medicare by cutting physician and other payments and limiting drug prices, shouldn’t we consider the impact? Squeeze a balloon and it expands in a different place. Do we expect lower payments simply to be absorbed with no consequence on the under age 65 population? Not likely.
My father was a chronic smoker. Several packs a day. Heart disease and emphysema to the extent he couldn’t walk across a room were his consequences. So far I have managed to escape effects from years of second hand smoke growing up, but I grew up with asthma.
Living above ones means may feel good in the near term, but the longer term consequences not so much.
On the other hand, a bit of frugality during working years may lead to a more enjoyable retirement.
I maintain that virtually everything is connected in some way, our society, our world for that matter. I think as a society and individuals we need to think things through, be more aware, more attuned to possible consequences before we act - or not.
The post Quinn’s latest rant has serious consequences appeared first on HumbleDollar.
Smart idea or not? Converting Vanguard mutual funds to Vanguard ETFs
It seems that converting my (non-IRA and non-Roth IRA) Vanguard mutual funds to the corresponding or equivalent ETFs is a smart tax move to make.
However, then I read this in Vanguard's information about making the conversion.
By making the conversion, I will be giving up the average cost basis of the shares I had purchased years ago, and applying the FIFO (First In First Out) cost basis.
This is what Vanguard says:
"If you are already locked into the average cost method by a sale, transfer, partial conversion or other disposition of your Vanguard mutual fund shares, we’ll have you exit the average cost method for any eligible shares of Vanguard mutual funds and apply the FIFO cost basis method prior to this conversion to the ETF share class. This means share lots acquired prior to the conversion will be listed individually with the averaged cost."
I don't want to make the conversion from Vanguard mutual funds to Vanguard ETFs if it will be a bad decision from a tax perspective when it comes to changing the cost basis to FIFO.
I need some help from the Humble Dollar community. What are your thoughts folks?
The post Smart idea or not? Converting Vanguard mutual funds to Vanguard ETFs appeared first on HumbleDollar.
May 11, 2025
How was your Mother’s Day?
After an exhausting but great Mother's Day at our Jersey shore home on a beautiful day here my wife and I collapsed as I reflected on how lucky we are compared to many families including many of our friends. We had our 2 daughters, son-in-laws, their parents (except for one dad who lives out of state and is divorced from his mom) and our 4 grandchildren together. Spending most of the day together, we all got along well and had a fun day (some bike riding, walking along the beach, and some boardwalk activities). Yes it was a lot of work to set up, prepare food and drinks (everyone made or brought something)and clean up after everyone left, but it was worth it (even my wife thought so…LOL). We are fortunate that our family lives reasonably close and we can include the in-laws so our kids don’t have to “decide where” or split their time on holidays like this one.
How was your Mother's Day?
The post How was your Mother’s Day? appeared first on HumbleDollar.
Retirement as you like it
Here I sit on my deck, the blue sky is cloudless. It is 74 degrees, no wind and quiet except for the birds making their views known. My view of anything beyond 50 feet is blocked by thickly leaved trees.
Between writing, I read commentary about tariffs, trade, economies on Project-Syndicate, a daily updated compilation of articles from scores of international writers. I’m also reading about the Salem witch trials and Ben Franklin’s rise to fame and testimony before Parliament about taxing the colonies - where have I heard about taxes before?
It’s a day to do nothing except what I want. It’s a day to be retired and enjoy. The doctor visits are over - for this week at least. My new eye doctor said I was a delight- perhaps a shock to some HD readers. He said most of his patients my age were grumpy, complaining and slouching in the chair. I delight in not acting or being perceived to be my age.
Yesterday I drove four hours roundtrip to my brother in laws 80th birthday party. During lunch several locals were talking and complaining about their property taxes. $3,200 was outrageous for 3.5 acres of property I was told. The fellow nearly choked on his crab cake when I told him we paid $13,500 on our condo with zero land.
Talk about projects in retirement. My brother in law has a fully equipped garage/shop on his property where he builds cars and their motors and everything else related. I couldn’t even handle Lincoln Logs and this guy takes old cars apart and puts them back together just like new.
I’m trying to finish reading a book and he has a “new” 1963 Pontiac Grand Prix he built, races and shows. I feel inadequate. He has a government pension, a very modest 457b balance, but doesn’t care and lives as he enjoys.
Retirement as you like it seems possible, at least if you live in rural Pennsylvania surrounded by corn fields with the nearest supermarket 10 miles away. That does sound appealing- some days.
The post Retirement as you like it appeared first on HumbleDollar.
Assisted Living – How will you choose?
Currently, about 65% of elderly are cared for by their families at home. For 13% of those who aren’t living with family, the gap is partially filled by assisted living establishments. The median cost of care is $5,900/month, but ancillary services are extra. That can bring that cost over $15,000/month. Every extra service is billed for maximum profit. Staffing shortages, more medical needs of patients due to older age, sparse state regulations, and profit driven private equity and corporate ownership has created an environment where compassionate care is not easy to find.
Choice of such facilities has to be made carefully. However, this is not always possible. In most cases, one has a week or so to make a decision which is "crisis driven." When you visit such facilities, you are shown beautiful buildings, with nice lawns, fountains, and shuttle buses. I visited about half a dozen such facilities in multiple states and they are, no doubt, impressive. But the ground reality on daily care may be very disappointing due to staffing shortage and profit mind set.
Here is an article that provides a good overview of the industry and issues.
https://www.theguardian.com/society/ng-interactive/2025/may/01/nursing-home-assisted-living-costs-care
Here are my questions:
What have been your experiences with assisted living facilities? Are non-profits any better? How will you choose a facility for a loved one or yourself? Is assisted living in a CCRC any better?
The post Assisted Living – How will you choose? appeared first on HumbleDollar.
May 10, 2025
Staying Alive
When I last checked in with you we were waiting to move to California to be closer to our, now, 18-month granddaughter. I shared the wisdom I had gotten from a six-day silent retreat. As Paul Harvey used to say, “now for the rest of the story”.
I broke my silence at the retreat to interview for my dream retirement job - being an usher for the San Francisco Giants. Despite the fact my wife told me when I applied “they aren’t going to hire a 67-year old with two replacement hips,” they did. I accepted the offer of a part-time, minimum-wage job and the opportunity to commute from North Carolina to California to do it. Another consequence of the good luck and timing of saving/investing over the years.
I had been a bit lost and depressed since November. The election results and our inability to find a place to live in California had been getting me down. The new job, and the Howard Thurman quote above, inspired me to move towards what makes me come alive. I decided to start working on my long-planned memoir with baseball as its main theme. I fell in love with baseball (and Willie Mays) in 1965 when I was seven and my family was falling apart. Perhaps it could help save me again when the country seems to be falling apart.
I started writing during spring training and started the new job in April. It’s been a whirlwind. I’ve been interviewing baseball fanatics like myself. Current and former writers, announcers, players and fans - including members of the HumbleDollar community. (If you are one please let me know!) Baseball gives them and me joy - and joy always makes me come alive. The faith of taking a job without a place to live paid off - we are closing on a new house in two weeks and the cross-country move will begin when we sell our house in North Carolina.
We face many challenges as we age and prepare for, or enter into, retirement. HumbleDollar helps us with the financial challenges but just as important can be finding and/or remembering what makes us come alive. The twinkling in my granddaughter’s eyes as she remembers my face, the smiles of six-year and sixty-six year olds as they walk into the ballpark and the conversations with people I never dreamed I would meet to talk about the memories and heartbreaks of baseball give me joy these days. And I feel more alive. I know that’s what I need now, I hope and pray it is what the world needs now too.
The post Staying Alive appeared first on HumbleDollar.
