Jonathan Clements's Blog, page 59
May 6, 2025
Am I Really Married?
I’m in the process of completing my retirement paperwork. For context, I’m retiring on the same day from two systems—the University of California (where I work now) and CalPERS (which administers the pension fund for the university system I previously worked for). My husband, who worked for a state agency, retired from CalPERS in 2016 and has been drawing his pension as well as using his retiree health benefits for both of us. We elected pensions with full survivor continuance for all three.
So here’s what’s weird. I got a message from the UC retirement system saying that the marriage certificate I uploaded as support for him being my survivor won’t serve. We were married in a church in 1983 and have a certificate signed by the officiant that we’ve always used as official documentation. The analyst who messaged me says the certificate is “ceremonial” and doesn’t show that it was filed with a county clerk. I had three options to resolve this, including the easiest one, which was to upload a previous 1040 that showed we are married filing jointly with both of our signatures.
CalPERS has never said a word about the marriage certificate, not when we separately filed for our pensions, and not when he had to prove I was eligible for health coverage. I keep a scanned copy of the marriage certificate handy for when they ask for it every few years (to reconfirm the spousal coverage). CalPERS has been much easier to deal with in general than the UC counterpart, which leads me to think they’re more competent with more modern processes. It’s possible that this UC analyst was wrong or overthinking things.
The immediate problem is resolved by the 1040, but now I’m wondering if I should follow up with the county clerk where we got our marriage license, which happens to be a different county from where the ceremony was performed. It might make sense to have an “official”certificate in case this problem ever happens again. And it makes me wonder—did the “ceremonial” certificate ever get properly filed, and if not, are we really married? (I’m mostly kidding about the last question, but the whole thing made me wonder.) Weird.
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Ch-Ch-Changes?
Stocks vs. bonds vs. cash investments
U.S. stocks vs. foreign shares
Large-cap vs. small-cap stocks
Growth vs. value stocks
If you've tweaked your asset allocation, I'd love to know what changes you've made—and why.
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May 5, 2025
Backstage at Antiques Roadshow
Hundreds of people who had won free tickets in an online lottery lined up at the entrance to the Georgia Railroad Museum. Most carried small items in tote bags. One woman pulled a grandfather clock in a little wagon. Another wheeled a wooden chest with a sailing ship painted on its lid.
Once they showed their printed tickets to security, visitors were directed to the triage tent. There, nattily dressed experts in bow ties and pocket squares gave their items the once-over. If one was worthy of further evaluation, their admissions leaflet was stamped with one of 23 specialist areas, such as Chinese art, ceramics, dolls, sports memorabilia, games and toys.
At the specialist booths, guests would queue up again, some under the hot Georgia sun and others beneath the shade of a towering locomotive in the museum’s roundhouse. They might wait 10 or 20 minutes to be seen at a busy booth, such as furniture or paintings. Everyone seemed cheerful and relaxed, wondering if they had a prize.
The show’s experts evaluated some 1,300 objects in one day at the railroad museum. Of these, about 10% are selected for a filmed appraisal with well-known experts like Leigh Keno or Lark Mason. And of these 130 filmed scenes, approximately 30 will make it into the final broadcast.
No doubt we’ll see many wonderful and valuable objects when the Savannah show is broadcast in 2026. Yet the odds of making it into that broadcast are 30 out of 1,300, or roughly 2%. As I looked about the grounds, I saw people lugging cherished objects, like ladderback chairs or dolls from the 1970s. I didn’t see anything that seemed of great value.
Still, I didn’t meet any disappointed people at the taping. At the feedback booth, fans of the show shared that they were excited just to be there. They had the additional satisfaction of unraveling the mystery of a family heirloom.
Like the woman at our inn, who at breakfast the next day showed us what she’d had appraised. It was a green soapstone carving of two monkeys flanking a small flower vase. Bow-tie wearing expert Lark Mason told her it was a ceremonial object given to Chinese monks who had returned from overseas missionary trips.
That’s a fascinating story. As to its value, Mason said it was worth about $50. And that’s what the woman said she had paid for it about 40 years earlier.
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FAQs IRS added March 20, 2025 regarding Employee Retention Credit
Due to the COVID-19 pandemic and a spike in unemployment federal tax law was modified and the Employee Retention Credit (ERC) was born. The ERC was a refundable tax credit for certain eligible businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic. The business, tax community and the Internal Revenue Service continue to deal with compliance aftermath of the ERC.
On March 20, 2025 the IRS updated their frequently asked questions about the employee retention credit in the section headed "Income tax and the ERC".
https://www.irs.gov/coronavirus/frequently-asked-questions-about-the-employee-retention-credit
The three added Q&A's on 3/20/2025 appears to be good for business, tax preparers and the government. Prior to the changes explained in the updated Q&A the ERC rules typically meant that employers who received a ERC benefit would have to amend prior year business income tax returns to disallow wages that were the basis of the ERC cash the business received, often in a subsequent tax year.
The updated ERC FAQs now have provisions where the business may include the prior year overstated wage expense (due to the wages being reduced by the ERC) amount as gross income on their income tax return for the tax year when they received the ERC. The FAQ detail and examples can be found at the above link.
I expect this small change in a IRS procedure will eliminate a large amount of mostly useless work for all parties. I welcome a step in the direction of tax simplicity.
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Sharing What We Read: Book Reviews for HD Readers
I'd like to pose a question to fellow HumbleDollar readers: What would you think about creating a dedicated space on the HD site where we can share book reports on titles relevant to the community—books on topics like investing, asset allocation, behavioral finance, risk management, financial history, and similar subjects?
Personally, after I read a book that I find valuable, I like to write a short report highlighting the ideas that stood out to me. It helps reinforce what I’ve learned, and allows me to refer back to these summaries later. I usually post them on my Facebook timeline, but I wonder if the HumbleDollar community might benefit from a shared venue for this kind of content.
Such a space could help others decide whether a particular book is worth their time—and might spark some thoughtful discussions along the way. Would you find this useful? Would you be interested in contributing?
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Financial Advisor – NEVER AGAIN
My wife and I each have our separate Fidelity accounts, since she like her independence, but I have managed her investments since our marriage 37 years ago. She agreed to let another person manage her account, just in case this 81 year old passes on prior to her.
Initially, there not many changes to the account and the results were marginally doing well. Then he suddenly he sold a fund that we had owned for a very long time, without my knowledge or consent. This particular fund, Fidelity Contrafund, had been out performing many other similar funds and had a five year annual return of 20%. Sadly, this one sale resulted in a long term capitol gain of $56,801. I was shocked and dismayed to say the least. When I contacted the advisor, his response was "You hired us to manage your account, that's what we do."
Of course it was to late to cancel the transaction, so I was left with a unacceptably large tax bill. I immediately canceled his "free service".
My advise - if possible manage your own stocks and mutual funds, no one cares about your bottom line more than you do.
Respectfully,
Robert Fay, Nevada
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Follow up on Dividend Investing
The Wall Street Journal today ran this timely article for investors who wish to further explore this strategy.
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May 4, 2025
Treasuries risk free, Bloomberg says NO!
https://www.advisorperspectives.com/articles/2025/04/23/us-bonds-never-risk-free-never-will
The above article, I believe provides interesting food for thought. It speaks to our latent recency bias, that people often make decisions based on how current things will get projected into the future.
I wonder if things get labeled "risk-free" as a selling point, so that we'll pay more, own more, beyond it's real value.
Well it's got me thinking.
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Have you planned survivor income for your spouse or someone dependent on you? RDQ
I remember the “good old days” when the husband’s earnings were his money, his pension was his pension. I remember when workers hid their overtime pay from the wife and when they elected a single life annuity pension because only they earned it, when they didn’t want any information about pay and benefits mailed to the home, including W-2s.
I recall when a disgruntled retiree came to our building looking for me claiming he had a gun because I allowed a domestic relations order to give 50% of his pension to his ex-wife. Of course, it was his lawyer that gave away what was rightly the wife’s and to which the retiree agreed-perhaps without reading what he signed.
Hopefully those days are long gone. Times have changed, more women are working with their own assets. Laws were enacted to protect spouses when it came to retirement and benefit plans, the need for which is a sad testimony to the past. Still, single and widowed women struggle the most in retirement.
Our finances are set with the goal should Connie survive me, her lifestyle need not change, including periodic visits to Talbots.
She will receive 50% on a portion of my pension and 75% of another (non-qualified). Life insurance will cover at least three years of living expenses. It is combine group coverage and paid up life.
She receives my FRA Social Security benefit plus interest and dividend income in an equal amount. Then, of course, the accumulated value of our investments to draw upon.
I often read on HD about delaying SS to increase survivor benefits, but I don’t recall other strategies for survivor income. I do remember some people dismissing the need for life insurance.
If delaying SS benefits is a significant part of meeting survivor income needs, perhaps more needs to be done.
What type of financial assets and vehicles do you have in place to provide for a surviving spouse or other dependent? Have you calculated their likely needs as you may have for your own retirement?
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May 2, 2025
Suffering in Private
It was an exaggeration to say he did “nothing,” but Edmundson definitely did things differently. Since the 1980s, the trend among pension and endowment managers had been to follow in the footsteps of Yale University’s David Swensen. Swensen had achieved outstanding returns for Yale’s endowment by shifting into private investment funds, including venture capital, private equity and hedge funds. Edmundson bucked that trend, opting for a simple portfolio of index funds. He ended up achieving better results than his peers.
Despite the attention Edmundson received for his simple approach, private funds continue to be popular among institutional investors. According to data from the Boston College Center for Retirement Research, 65% of endowment assets are invested in private funds, as are 35% of public pension funds.
Today, there’s a growing push for individual investors to get into private funds. Firms such as Morgan Stanley, Goldman Sachs, BlackRock and even Vanguard Group are rolling out new funds geared to individuals. In his annual letter this year, the CEO of BlackRock made this argument: “While private assets may carry greater risk, they also provide great benefits.”
I don’t find this argument convincing. Even for very high net worth investors, the downsides of private funds can outweigh the benefits. Five factors, in particular, stand out.
1. Performance. A key challenge with private funds is that they’re like private clubs. They have limited space, so they can’t accept everybody. As a result, universities and pension funds, which can write the largest checks, are typically first in line for the best funds. This relegates individuals—even very wealthy individuals—to the second tier and below.
In an interview a while back, one high-profile venture capitalist explained this dynamic: “[W]hy do I want an investor in my long-term capital fund who's going to feel the urge to want to sell when the market goes down…. If I'm in the fortunate position to be able to choose any investor I want, that's the last investor I want. So the best investor, the one that is the most long-term oriented, is either a university endowment or a charitable foundation.…”
This is a problem because research has found that a wide gap separates the best private funds from the worst, and that this gap is much wider than the corresponding gap among publicly traded funds. Result? The private funds available to individual investors may not deliver the returns these investors expect.
Meanwhile, the future performance of private funds—even the best funds—is starting to look more uncertain. According to a recent analysis by Moody’s Investors Service, private equity firms were facing a challenging environment even before this year’s market downturn. The chairman of Bain & Company, one of the most prominent firms in the field, recently commented, “We aren’t even in a recession now, and we’re already at a point where things are incredibly challenging.”
This may help explain the pattern in recent private fund performance. Over the past 25 years, private equity has, on average, outperformed standard market indexes like the S&P 500. But this edge has lately disappeared, and private funds have lagged in recent years.
2. Illiquidity. Back in 2008, when financial markets seized up, some universities found themselves boxed in by their private fund holdings. Most notably, Harvard made news when it was forced to sell a significant portion of its private equity holdings at a loss during the worst of the crisis.
Why did Harvard sell its holdings at such an inopportune time? This gets at another key difference between public and private funds. Withdrawals from private funds are tightly controlled. Some funds allow quarterly redemptions, while others allow redemptions only annually. During periods of stress, however, these funds have the right to suspend withdrawals altogether. This is known as gating.
This is the position Harvard found itself in. In that situation—when a private fund won’t offer a redemption—the only alternative is to try to sell the holding to another investor on the “secondary” market. Such sales aren’t guaranteed, though, and that can compound financial distress.
Ironically, Harvard seems to have made the same mistake twice. Facing a reduction in funding from the federal government this year, the university is reportedly trying to arrange another secondary sale, looking to offload up to $1 billion of its private fund portfolio. Yale, too, is working to unload some of its holdings.
Some of the newer funds being rolled out for individuals allow for more frequent withdrawals, which is helpful. Still, illiquidity is just one of the challenges posed by private funds.
3. Fees. If there’s anyone who knows the landscape of private funds and fund managers, it’s longtime Wall Street Journal reporter Gregory Zuckerman. He’s covered the world of hedge funds and private equity since the 1990s, so his reaction was notable when, back in March, it was announced that the Boston Celtics would be sold for more than $6 billion to a private equity executive named Bill Chisholm.
“Private equity is rolling in so much dough that a guy I've never heard of at a firm I've never heard of can afford to buy one of the most prestigious teams in sports,” Zuckerman wrote.
Private fund fees, in other words, are extraordinarily high. According to one recent study, fees can total as much as 4% per year. By contrast, index funds today charge as little as 0.03% in annual expenses, and some are even free.
4. Risk. Private fund enthusiasts argue that these funds carry lower risk than their publicly traded counterparts. But the basis for this argument is shaky. Since private funds generally issue valuation updates infrequently—usually just quarterly—they exhibit less price volatility than public funds, where prices are updated every day. But this just makes private funds appear more stable. During periods of market stress—when it matters most—private fund valuations can become quite disconnected from reality. Critics have called out this practice as “volatility laundering,” but it continues.
Pricing, though, is just a symptom of a larger issue: that private funds are essentially black boxes. They aren’t subject to the same regulatory oversight as standard funds and offer much less transparency. While fraud can and does occur at public companies, it’s much more prevalent among private funds.
5. Taxes. A final challenge with private funds is that they tend to deliver unpredictable tax results, and often these results aren’t even known until many months after the year has ended. This makes tax planning for private-fund investors an exercise in frustration.
Can you make money in a private investment fund? Probably. But I see it as an uphill—and unnecessary—battle.
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.The post Suffering in Private appeared first on HumbleDollar.
