Jonathan Clements's Blog, page 60

Harriman House changes business model

I have bought books, including My Money Journey by Jonathan Clements, from Harriman House. I received a email today advising me that Harriman House will no longer be selling our books directly to customers from 9th May 2025.

My question is which of the book stores I decide to buy from pay the book authors the best book royalties.

 

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Stay or Go, and How Do We Know? By Dana/DrLefty

Last year I wrote a couple of HD articles called “When and Where?” about my upcoming retirement decisions. The “when” is settled: I’m retiring on July 1 (checks countdown app: 1 month & 28 days!). The “where,” I thought was also settled: We’d stay in the college town (Davis, CA) where we’ve lived for over 30 years, raised our kids, and built a life.

We’re now rethinking the “where,” but in two different ways: (1) Do we stay in Davis, or might we move to San Diego County near our daughter? (2) If we do stay in our town, do we stay in the condo we bought in 2019, or do we buy a different home?

As to #1, we are aware of the pitfalls of relocating in retirement to be near an adult child. If we did move to San Diego County, the primary reason would indeed be to be a more active part of her life. Secondarily, though, we love the ocean and the coastal climate—yet have lived in hot inland parts of California for most of our adult lives. We fell in love with San Diego before she moved there, and there’s a lot it could offer us, with or without her being there.

If we stay in Davis, it would be because of our roots there: our church, our friends, our comfort level because of so much familiarity (doctors, optometrist, dentist, hair stylist, massage therapist, Pilates studio, nail salon, you get the idea), and proximity to the university where I will be a professor emerita (and get discounts on the performing arts center, basketball games, etc.).  Most of our families, except for the daughter in San Diego and my husband’s elderly stepfather, live in Northern California in easy driving distance, so we’d be trading proximity to them, too.

As to #2, though we enjoy our condo, the larger home community we live in (pool, walking trails, clubhouse, etc.), and our neighbors, we’re put off by a couple of things if we consider this a long-term home: the high fees for two HOAs (which have risen from $500 to over $700/month in six years), the lagging values of the condos on the local real estate market, and practical issues such as elevators going out of service, which concern us when we think of living on the top floor as we get older. We can climb three flights of stairs now when we have to, but later?

The biggest reason to possibly move out of the condo to a single-family home, though, is that I really, really, really want a dog. It’s been almost seven years since we lost our last dog, and I have a dog-shaped hole in my heart. Dogs are certainly allowed in our condo, there’s a dog park and walking trails on property, and I’ll be retired and have plenty of time to care for a dog. But having a dog in a condo is a bigger hassle than in a house with a yard.

Both housing markets we’re considering are expensive, and we can afford a moderate upgrade if we choose to go that route. But we don’t want to make a hasty mistake.

So here’s how we’re trying to look at this:

We’ve booked a VRBO for three weeks in July in San Diego County. We’ll spend time by the beach and with our daughter, but we’ll also get to know the area better (so far it’s just been quick trips to visit her), and perhaps we’ll even take a day or two with a local realtor to see how we like the homes in our price range.One option we’d consider in that area is an upscale 55+ community. There are rental properties available there, so if we decided to take the next step in relocating, we might lease a place for six months or a year while renting out our condo back in Davis. That would give us an even better sense if we’d like living in the area or if we’re desperately homesick for Davis.As to other properties in Davis, we’ve already been looking since fall and have been to a number of open houses. The pickings have been slim, and we haven’t seen anything we’ve loved enough to spend the money. We’ll probably keep looking, though, just to have an up-to-date sense of the market.Right now we’re thinking that we’ll do nothing for at least the next year. The current upheaval in the economy is making me anxious, not about our current situation, which is stable, but about making a major move that stretches us thinner financially.

We may end up doing nothing at all, and I’ll either deal with having my aspirational dog in our condo or give up the dog idea for now. It’s an interesting set of variables and choices, though.

 

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A Rant about the Price of Gas

A detour from personal finance to something more macro:Isn't it amazing (sarcasm intended) that the price of a barrel of oil has dropped from $ 72 to $ 59 over the past month, yet "shockingly" - sarcasm intended, again - the price of gasoline hasn't budged in my area. It seems that the oil companies have no problem raising the price of gas IMMEDIATELY, whenever there is a hiccup in the Middle East, but they FORGET how to lower prices when the price of oil goes down !

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Very disturbing proposal about the future of Social – radical thinking for sure.

On my blog today I have a piece on a radical and very disturbing proposal from the CBO to change Social Security. The story originally appeared on MarketWatch.

There is a tinge of politics, so I am not posting it directly, but if Social Security is a concern, you might want to take a look on Quinnscommentary.net

The link goes directly to the article

 

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Feeling Secure by Jonathan Clements

I love going to bed. There’s something comforting about lying in the darkness, wrapped in the sheets and blankets, knowing the wider world is unlikely to intrude. What bad could possibly happen? To me, there’s no safer place.

No doubt others feel differently, finding a sense of security elsewhere—in their SUV safely separated from other drivers, in the hefty balance in their checking account, in their large house fenced off from their neighbors, in their modest monthly financial obligations, in the fairly predictable stream of dividend income that flows each quarter into their brokerage account, in their collection of firearms, in their detailed financial records listing assets and expenses, in the wealth of possessions they’ve amassed over the years, in their pantry, refrigerator and freezer full of food. We all want to feel secure, but we all find it in different places.

This is clearly linked to the well-known phenomenon of loss aversion, which is our tendency to get more pain from losses than pleasure from gains. What is it that we need to feel safe from losses? How we answer this question drives how we manage our money.

For instance, I don’t budget or closely track my expenses. I don’t have a separate emergency fund. Indeed, I don’t keep much in cash and bonds, though I’d likely stash more in conservative investments if I wasn’t continuing to earn enough to cover my living costs.

But at the same time, I avoid debt and I look to pay bills as soon as they arrive, because I don’t like owing money. My desire to feel safe also drives my day-to-day reluctance to spend, though these days I’m more willing to splurge on trips and eating out, one result of my cancer diagnosis.

What we need to feel safe feeds into our risk tolerance—a notion usually associated with how much investment risk we’re willing to take. But our risk tolerance shows up in multiple ways:

The insurance policies we buy and the coverage each policy offers
How much emergency money we hold
How far we live below our means and hence how much financial breathing room we want in our day-to-day finances
How much debt we carry
Our mix of stocks, bonds and cash investments
How broadly we diversify our stock and bond portfolio
How much attention we pay to FDIC coverage and the financial strength of our insurance companies, and how broadly we spread our money across financial institutions

I used to think that there were “right” ways to manage life’s financial risks. But I’ve come to realize that what folks need to feel safe varies widely—and, if the financial cost isn’t too high, who am I to quibble?

That brings me to today’s question: What do you need to feel financially safe?

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How Big Is Your Umbrella, Follow-Up

I recently posted a request for comment about the appropriate amount of umbrella insurance one should have. I was hoping to learn of some formula or rule-of-thumb stating that "if your net worth is $X, you should carry $Y of umbrella coverage." As far as I can tell, there is no such formula or rule.

Many thanks to those who responded.

Mark Eckman wrote that most insurance companies offer a maximum umbrella of $5 million.

Patrick Brennan’s insurance representative regarded $500,000 of liability coverage on his auto policy and a $1 million umbrella as sufficient for his needs.

John Yeigh indicated that the most common legal settlements are in the $1-2 million dollar range. He personally has $3 million of umbrella coverage.

Rob Jennings and David Lancaster both cover their net worth. Edmund Marsh has coverage a step above his net worth.

Adam Grossman, in his post Grab an Umbrella, dated May 2, 2021, doesn’t explicitly call for matching umbrella coverage to your net worth. Instead, he asks how large a legal judgement against you might be. He cites one study reporting that most settlements fall in the $1-5 million dollar range. He therefore recommends that your umbrella coverage falls in that range as well.

The website www.ramseysolutions.com (affiliated with radio personality Dave Ramsey) recommends carrying umbrella insurance if your net worth exceeds $500,000. Beyond that, your umbrella policy should cover your net worth according to the site.

Ultimately, the extent to which your lifestyle exposes you to potential lawsuits (e.g., you have a pool, you coach youth sports, etc.) will dictate what an appropriate level of umbrella coverage is for your needs.

My conclusion: If your net worth falls within the $1-5 million range cited by Adam, match your coverage to your net worth. Beyond that, talk to your financial advisor or insurance agent.

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How can we mere mortals figure out stocks, when the “experts” are confused?

As I have mentioned, stock in my former employer (PEG)  is one of our largest holdings. I have owned it for 50 years or so. It’s recent financial reports were good, but it missed one estimate by one penny.

That range over the last 52 weeks was $68.29 to $96.52. Other than interest rate concerns I have no idea why. Today the price is $78.79.

Then I read this:

NewsEvercore ISI Adjusts Price Target on Public Service Enterprise Group to $92 From $99MT NEWSWIRESMay-01-2025 11:36 a.m. ETGuggenheim Adjusts Price Target on Public Service Enterprise Group to $94 From $98MT NEWSWIRESMay-01-2025 11:34 a.m. ETBMO Capital Adjusts Price Target on Public Service Enterprise Group to $81 From $83

So, who does one believe, bet on, if you will? What do they know, we don’t? Why would the stock climb $20 or so a share, why did it drop nearly $30 in the last 52 months and the go up with no change in the company to speak of?

Is there any logic or are the markets one big casino?

This inquiring mind wants to know how this works not just for this stock, but overall.

Enlighten us Jonathan.

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Kitces – Analyzing Congressional Republicans’ Budget Proposal For The 2025 TCJA Extension

On April 30 Kitces posted an comprehensive article regarding the Tax Cuts and Jobs Act (TCJA) describing in detail where the congress is currently at and what steps are necessary to extend and/or change the the TCJA before the current tax law sunsets at the end of 2025.

https://www.kitces.com/blog/tax-cuts-and-jobs-act-tcja-sunset-budget-resolution-reconciliation-salt-cap-qbi-deduction-congress-republication-house-senate-bill/

I agree with the conclusion of the article to currently "wait and see" before taking action until I have a concrete expectation of what the individual income tax rules will look like in 2026. For me that means I plan to delay any traditional to Roth conversions and, as I have earned income for 2025, I will wait until 2026 to decide to fund any 2025 traditional or Roth IRA.

The one action I am doing is to have sufficient 2025 federal income tax and estimated tax payment paid in to protect us from the possibility of underpayment penalty based on the safe harbor rule determined using our 2024 adjusted gross income and 2024 tax liability.

Any other tax actions you are planning to take during 2025?

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Quinn needs some advice about his RMD

After several years of RMDs from my rollover IRA, I’ve run out of cash to cover the withdrawal. In 2025 there is enough cash to cover about half the required RMD.

So, where does the rest come from? Which fund(s) do I sell? Here are the funds and their percentage of the account balance. 

NOTE about these funds. There is no rhyme or reason. A logical strategy does not exist. Some resulted from the transfer of the account. We don’t use the funds to live on. The RMD will mostly be given to charity and our children. Whatever is left reinvested. 

FSPGX 48%. FIDELITY LARGE CAP GROWTH INDEX FUND

FTHRX 18%. FID INTERMEDIATE BOND FUND

FIVFX 11%. FIDELITY INTL CAP APPRECIATION FUND

FBALX 8%. FIDELITY BALANCED

FSMDX 6%. FIDELITY MID CAP INDEX FUND

LEGAX <6%. COLUMBIA LARGE CAP GROWTH CL A

VHYAX < 6%. VANGUARD HIGH DIV YLD IDX ADMIRAL SHS

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The Opposite of HumbleDollar

If there is an antonym to HumbleDollar it surely must be in the form of a gift my wife just received from her niece. The gift is a bag. It’s a designer thing. From Paris. I googled the bag, and if you are interested you can buy one of your very own for about $4000.

My wife’s bag is actually a knock off, a counterfeit. The niece only paid 50 bucks. I couldn’t figure out how to post a picture, so I will try to describe it.

It’s a bag, it has strap, no zipper, totally open on the top. Picture one of your reusable shopping bags for the grocery store.

Chrissy just looked over my post, and has informed me that it is not a bag. It is a tote. I stand corrected.

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