Jonathan Clements's Blog, page 47

IRS: All of Tennessee qualifies for disaster tax relief

From IR-2025-47, April 14, 2025

The Internal Revenue Service announced today tax relief for individuals and businesses in the entire state of Tennessee affected by severe storms, straight-line winds, tornadoes and flooding that began on April 2, 2025.

These taxpayers now have until Nov. 3, 2025, to file various federal individual and business tax returns and make tax payments.

The full announcement IR-205-47 at the following link -

https://mail.google.com/mail/u/0/?pli...

Imagine having worked long hours for months on end. The next day is April 15, the tax due date without extension. You glance at your news feed and the government has just extended the due date for both filing and paying taxes for over six months for all 95 counties in Tennessee. This accommodation is not just for the areas and people who have been subject to a true life changing disaster but for everyone in your state.

Then your phones start ringing off the hook. Clients want to know have you already hit the send button to file their electronic extension and to have their tax payment drafted or want to know if we mailed their check they brought us last week to pay their 2024 federal tax and/or first quarter 2025 estimated tax payment.

There are days and then there are days. Today was one of those days Tennessee tax preparers may laugh about in the future, just not today or tomorrow. I would encourage our elected federal officials to change the due date for filing individual returns to the following October 15 every year and just get rid of extension requirements. This is not new thinking as many states already have this procedure in place. The federal government can just charge interest and/or late payment penalty exactly as they already do and eliminate a lot of stress and needless work on both the IRS and preparers by having a more reasonable due date.

What are your thoughts on how we may do better as we work for a more perfect union?

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Trying To Think Through the Bond Situation

I’ve mentioned my dumb luck at having most of our money in cash, earning about 4% as of 4/1. My strategy is to dollar cost average back into the market between now and the end of the year. If you ask my reasoning on this, I’d just say that I don’t want to be late to the party that follows the end of trade war. I have begun the process with my IRA, and will soon start on Chris’s.

My quandary has to do with our bond allocation. Thinking that the Federal Reserve would soon lower rates to stave off a possible recession I was considering fully investing the bond allocation at this time. It now seems that a wrench has been thrown into my plan. With other countries now demanding higher interest rates on U.S. debt due to the trade war, I’m not so sure of myself any longer.

Anyone want to jump in and help me think this through?

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Car talk- Quinn likes friendliness

What do you look for when buying a car? Quality, reliability, safety features, good mileage? Yup all that plus I like technology and friendliness.

My new car has more cameras than Kodak. When I use the navigation it shows a live image of the turn so it’s hard to miss. It uses the cameras to find a space and park itself. If I get lost I just say, “Take me home.”

When I start the car it says, “ Hello Richard Quinn” That’s friendly. When I turn it off it says, “ Don’t forget your phone.” 

When I started the car on Thursday April 10th, the screen showed the Masters Logo, an image of me in a green shirt and a golf ball. On Saint Patrick’s day there were shamrocks falling down the screen. I can’t wait for the Easter Bunny.

Making adjustments are done by voice command. Say, “I’m hot” and she will say okay I’ll lowered the temperature - and it knows if you are the driver or passenger. The other day I put the defroster on by mistake and it got really hot so I said, “I’m hot.” The car responded, “Me, too it’s really warm in here.” and turned off the defroster. 

Concerned about tire pressure? Just ask. “Right front 41, right rear 40, etc.” How much gas do I have? “You can drive 264 miles.”

When Connie asks for something, she then says “thank you” The car replies differently each time. “You’re welcome or “My pleasure, have a nice day.” etc. The manual says the car is always learning new words. It makes me wonder who has the AI, me or the car. 

If I wander near the white line, the car steers me back to center. Scared the heck out of me the first time. 

At night, we are bathed in ambient light in a color of our choice, just ask. 

I’m still learning all that it does and how, I guess I should actually read the full manual, but that is unlikely. 

What does all this friendliness get you? More things to go wrong, higher repair costs and higher insurance premiums. It certainly isn’t necessary to go from A to B. 

Truth be told, all, this stuff is like driving an iPad and a bit distracting at times. It’s like having eyes on every side of your head. I like it though, it’s fascinating. It’s cool. What will be possible in the future? And I thought robotic prostate surgery was neat. 

My first car was a new 1962 VW Bug. It didn’t have AC or a heater or power anything and it cost $1,895. I competed in road rallies and drove it across the Country. Those were the good old days- but it never said a word. 

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RCC asks – How will you know when it’s time?

A number of events over the past few months have me thinking about aging, mortality, legacy, frailty, and – of course – financial planning. These events included attending funerals, preparing tax returns (ours and dozens of others), visiting old friends and distant family, minor traffic accidents, winter doldrums, and the recent discussions on HumbleDollar on the unique estate planning needs of childless retirees. Recent market volatility may have played a small role.

My wife and I have a lot of real-world experience caring for aging and infirm parents, both physically and financially. Those experiences have seared in my mind the importance of a well-planned, well-documented, and well-communicated estate plan. Jonathan’s articles over the past year have been a great example of this.

A recent experience has me thinking about a very tricky and personal question in retirement. I have a good friend, a former colleague and mentor, who is in his late 70s, single, and childless. He lives in his home of 30 plus years, with a first-floor master bedroom, and relatively easy entry. He has his estate in very good order, has a deposit on a CCRC near family, and has communicated this with his family. He hopes he will have the ability to make the choice to move when the time comes.

It’s one thing to have a good estate plan in place. But if we haven’t communicated that plan, or are unwilling to execute it, it’s of little use.  I can’t count the number of stories I’ve heard of aging parents that are unwilling to explain their finances with their children, much less hand over control. Will we be willing to give up the literal keys to our independence – our cars? Has anyone thought about, or put criteria into place, to help make good decisions about your future? Have you communicated that to the important people in your life?

I took a pretty serious tumble about a year ago. The injuries were mostly bruises, scrapes, and cuts.  I don’t think the fall caused any cognitive issues, at least not any more than the 2 pints of Guinness that preceded it. But it could have been much worse, and it reminds me that things can change in an instant. So, I ask my HD friends – how will you know when it’s time? More importantly, will you be willing to execute the plan?

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Ida M Fuller, Social Security, EVs, taxes and a 340 million person society-Quinn rambles on, but with a purpose

The first Social Security retirement check was issued to Ida M. Fuller on January 31, 1940, for an amount of $22.54. She had paid SS taxes a little less than three years. She died Jan 27, 1975 at 100 years old. It’s a pretty good bet she didn’t pay for her own benefit.

But that is not the point. The point is Social Security has worked quite well paying benefits for 85 years. The is no justification to attack it. There is no reason to screw it up now.

The SSA, estimates that about half of the population aged 65 or older live in households that receive at least 50 percent of their family income from Social Security benefits and about 25 percent of aged households rely on Social Security benefits for at least 90 percent of their family income.”

All the rhetoric about its future, it being a scam, a Ponzi scheme, I could do better investing the taxes myself, the money was stolen, I paid for my benefits is noise, nonsense. 

Tens of millions of retirees, surviving spouse, ex-spouses, dependent children and disabled adults and children depend on the program.  

Social Security is essential to the economic and social wellbeing of the United States.

A form of SS is not unique to the US. Well over 100 countries have similar programs. Many pay higher benefits replacing more than 40% or so of pre-retirement income on average. In many cases worker taxes to fund their program are higher than in the US. 

For reasons unknown to me, many Americans can’t make the connection between paying taxes and the services and programs we want and need. There are those of us who don’t use some programs so don’t see the need to pay taxes. Seniors against property taxes comes to mind.

To illustrate sharing costs, New Jersey now charges owners of electric vehicles and extra $250 when they register their vehicle each year. Why? Because they don’t pay the gasoline tax that funds road maintenance. I bet there are EV owners who see that as unfair. 

This is a society of 340 million very different people, people with varied abilities and needs. There are winners and losers, doers and takers, and that will never change. But it would be nice to think we are also a functioning, caring society. 

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Lesson Four From Taking Care of a 102 yo in Her Last Year of Life- The Final Hours of Life Can be Beautiful

Unfortunately I have had a lot of experience in this realm. In an 18 month period during 2017-18. I first lost my twin brother at 59 years old; then almost 1 year later my father, and six months after that my mother each on one side or another of 85. Unfortunately all of them suffered from some type of dementia. As a result at the time of their passing we were unable to communicate with them. With my brother I remember sitting at his bedside thinking, can he hear us, does he know what’s happening (unlikely), or ie suffering?Another type of suffering can occur when one of the surviving siblings can make the final hours intolerable due to their behavior. I was not present at the final passing of my mother. The evening of her passing I could no longer tolerate the tension, broke down and told my wife,”I can’t go through this again”, and we left thinking that we would get a call if time was getting short, as my father’s passing took days. At 2 am the following morning I received a call from that family member that she had died. When I asked what happened the family member, “she was dying!”

Fast forward to this March and my mother in law was declining rapidly. Luckily the day before she passed despite being over 103 years old she was able to communicate with us and when we left around dinner time she thanked my wife and I for caring for her in her final decade including welcoming her into our home for the final year. It was definitely her saying goodbye. The night before her passing I could not sleep and after a half hour in bed I decided to head to the hospital to be with her, arriving just after midnight. When her condition would change I was able to immediately notify the nurses who would make her comfortable. The atmosphere was totally different from that of my family members’ last hours as it was very peaceful. My wife and daughter arrived in the early morning we reminisced, laughed, and cried. Less than three hours later her passing was dignified and peaceful, just what I had longed for with my family members.

Unfortunately, or fortunately I went through another dignified and peaceful passing of my uncle four days later with my aunt and two cousins and spouses.

My plea to HD readers is when you are I such a situation at the end of the life of a loved one please take into account that there are others around, that the process of watching a loved one pass is different for each individual, and try to make the event respectful and peaceful for all those involved.

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Change is good – and profitable

For more years than I remember I have saved my pocket change. Every day I put it in a tray on my dresser. When it overflows, Connie bags it and eventually rolls it for deposit. That happens at around $80.00.

I never pass a penny on the ground. In fact, on occasion I dig one out of the soft tar. Some coins are so mangled it’s hard to tell what they are at first. Sometimes people stare at me, but I don’t care, I’ve got the cash. When I’m wearing jeans and suspenders and an old jacket I look like a pauper - according to Connie - so bending over to pick up a coin fits well. It’s the rare occasion when a passerby asks if I need help getting up that hurts my ego. 

If they eliminate the penny, I will do a lot less picking up from the sidewalk.

These accumulated coins have a designated purpose.They go into our travel savings although that’s overflowing as we haven’t traveled much and unlikely to do so soon. 

My drive to save coins goes back to when I was a kid, we collected soda bottles and redeemed for the two cents or a nickel. Back then two nickel bottles got you an ice cream cone and three a slice of pizza. 

Why not save your coins, why let one lay on the ground? Who cares what people think?😎

I’m trying for the old method of saving a penny a day and doubling it each day for 30 days. It’s like a snowball rolling down a hill and getting larger as it rolls. 🤑

On day 1, you start with just $0.01.
On day 2, you double it to $0.02.
By day 10, you’re at $5.12

etc. 

Keep that up for 30 days and you have $5,368,709.12.

Good luck. ‼️

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Spreading Your Bets

YOU MAY BE FAMILIAR with Peter Lynch. In the 1970s and ‘80s, he was one of the most visible figures in the investment world. As manager of Fidelity Magellan Fund, he achieved the best track record, by far, among his peers. He shared his wisdom in a series of popular books for individual investors.

Among the ideas for which Lynch is best known is the notion of “diworsification.” As its name suggests, Lynch argued that diversification simply for the sake of diversification isn’t always a good thing. If a portfolio is diversified in ways that detract from performance, it ends up being counterproductive.

This argument poses a challenge for individual investors. Especially this year, amid a rocky stock market, diversifying seems like the right thing to do, and that’s a broadly held view. Diversification is often referred to as the first rule of investing. So why do Lynch and others disagree, and what’s the best approach for individual investors?

The arguments for diversification are straightforward. Because investments rarely move in lockstep with each other, it’s helpful to have a mix of holdings. If share prices don’t all move up and down together, having a mix of stocks—especially in combination with a mix of bonds—can help dampen a portfolio’s price swings. Because of this dynamic, it’s almost a truism of personal finance that diversification simply makes sense.

This view has been broadly accepted in finance at least since the 1950s, when Harry Markowitz wrote his Ph.D. thesis on the topic. Markowitz’s paper is full of detailed formulas. But even before Markowitz, the intuition behind diversification was well understood. King Solomon offered this advice: “Invest in seven ventures or eight; you do not know what disaster may come.” Similarly, there’s the popular aphorism “don’t put all your eggs in one basket.”

But not everyone shares this view. In 1885, industrialist Andrew Carnegie gave a commencement address at a local college, and here’s what he said: “Don’t put all your eggs in one basket is all wrong.” He criticized those who scattered their investments “in this, or that, or the other, here, there and everywhere.” Scattered efforts, he felt, led to scattered results. Instead, Carnegie advised the audience, “Put all your eggs in one basket, then watch that basket very carefully.” In other speeches, Carnegie echoed this theme. “The great successes in life,” he said, “are made by concentration.”

Over the years, numerous investors have seized on this philosophy. Hedge fund manager Stanley Druckenmiller has cited this as his guiding principle. “All the great investors have made their fortunes by doing the opposite of diversifying,” he’s said, citing Warren Buffett and other fellow fund managers. According to Druckenmiller, Carl Icahn once put half his net worth into one stock—Apple—and made a fortune.

Warren Buffett has been maybe the most vocal proponent of this approach. “Diversification is a protection against ignorance. It makes very little sense for those who know what they’re doing.”

How can investors reconcile these viewpoints? On the one hand, diversification seems like the right thing to do, supported by both intuition and by decades of research. And yet some of the world’s greatest investors dismiss it with disdain.

The answer, I believe, is hiding in the details. Buffett says that diversification makes no sense, but he qualified that by adding “for those who know what they’re doing.” Similarly, Buffett’s late partner, Charlie Munger, once said, “The idea that a big portfolio of stocks is safer than a concentrated one is madness,” but added “assuming you know what you’re doing.”

In other words, holding an undiversified portfolio might make sense, but only if it’s your full-time job—that is, if you have the time to “watch that basket very carefully.” For ordinary people, Buffett and others agree that diversification makes good sense.

In fact, the reality is that even the greatest investors don’t always get it right. For years, Wells Fargo was one of Berkshire Hathaway’s largest holdings. But when a pattern of fraud came to light, the stock cratered, and Berkshire ultimately exited the investment. Stock-picking isn’t easy, even for these pros.

Risk of loss is one reason to avoid being too concentrated. But academic research has identified another reason to embrace diversification. As I’ve noted before, research by academic Hendrik Bessembinder has found, counterintuitively, that just a tiny fraction of stocks—4%—account for all of the stock market’s net gains relative to Treasury bills. The implication: If a portfolio isn’t sufficiently diversified, it runs the risk of excluding the next Apple or Nvidia, and that could be costly.

What does it mean to build a sufficiently diversified portfolio? For starters, it should be diversified along more than one dimension. Nearly every investor, in my view, should own a combination of stocks and bonds. In addition, holding cash can help carry a portfolio through years like 2022, when both stocks and bonds were down. Next, look to diversify within bonds and within stocks.

The market this year, in fact, has delivered a picture-perfect example of why diversification matters. For the past 15 years, investors have been punished for choosing virtually anything other than the S&P 500. But this year we've seen that reverse. International markets have outperformed. Meanwhile, within the U.S., value stocks have outperformed growth stocks like the “Magnificent Seven” that have led the market for years. Diversification, in short, can test investors’ patience. But as we’ve seen recently, it can pay off when we least expect it.

A note of caution: While diversification is important, it’s also important to diversify sensibly. In 401(k) plans, researchers have found that plan participants sometimes choose investments in ways that only look diversified. One study, for example, found that investors used a “1/N” approach to allocating their 401(k) funds, putting an equal amount into each fund regardless of fund type. Another study found that 401(k) participants exhibited “alphabeticity” bias. They diversified but tended to pick from the top of the list.

How can you avoid these pitfalls? A rule of thumb I suggest: Select investments in a way that covers all of the world’s major stock markets but with as little overlap as possible. For bonds, where exchange rate fluctuations can easily offset any gains, I recommend that investors stay closer to home. A sensible mix of domestic bonds, in my view, is perfectly sufficient.

Also keep in mind that diversification isn’t just about portfolio management. Several years ago, I suggested five other ways to diversify, and there are likely many more. It is, I believe, the golden rule of personal finance.

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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No financial wisdom here other than ….

From looking at the forum posts, Most HD readers are calm and it seems not worried about the markets.  I really don’t believe that because what has happened in the last week and a half has been unprecedented and there is no end in sight.
Without injecting politics into the discussion how are we HD readers going to handle the next 45 months of this turmoil that is caused by the whims of one man who doesn’t understand economics and no one else in his cabinet no matter how bright and successful somehow agreed to be a yes man.  I’m looking for a real discussion about how to protect my retirement savings.  There, I said it.

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How Big is Your Umbrella?

Many HumbleDollar readers have saved and invested regularly over their working years and were able to retire comfortably. Unfortunately, a lawsuit could threaten that financial security.

One possible scenario: If, heaven forbid, you are involved in a traffic accident resulting in severe bodily injury or loss of life, a legal judgement against you could destroy your nest egg.

The liability coverage on a home or auto policy may not offer enough protection. For this reason, we are encouraged to purchase an additional umbrella policy.

Umbrella policies are usually sold in increments of one million dollars of coverage. Each additional increment raises the premium. But how much coverage do you really need?

The only recommendation I’ve run across is to match umbrella coverage to your net worth. But that is unsatisfying. If, for example, your net worth is $50 million, I can’t imagine you need $50 million of coverage.

For those HD readers who have an umbrella policy, how much coverage do you have, and how did you arrive at that figure? Have you ever heard of a rule of thumb for determining what a proper level of coverage might be?

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