Jonathan Clements's Blog, page 62
April 25, 2025
No Exception
FRENCH HISTORIAN Alexis de Tocqueville toured the U.S. in the 1830s and chronicled his observations in a book titled Democracy in America. What mainly impressed him was Americans’ focus on trade and commerce.
They have a “purely practical” mindset, he wrote, and concluded that “the position of the American is quite exceptional.” In the years since, others have picked up on this concept of “American exceptionalism.”
Despite recent political and economic crosscurrents, the gap between the U.S. economy and its peers has only widened, especially over the past dozen years. Between 1990 and 2012, according to an analysis by author Larry Swedroe, corporate earnings in the U.S. grew no faster than in other countries.
But since 2012, American companies’ profits have multiplied while—in aggregate—international companies’ earnings have stagnated. As a result, markets in the U.S. have far outpaced their international peers. This has made investing outside the U.S. feel like a losing proposition for quite some time.
On the surface, this seems easy to explain. In the U.S., entrepreneurship is key to our DNA, and our regulatory regime makes it easy to get a business started. Hewlett and Packard got their start in Packard’s garage. Gates and Zuckerberg founded trillion-dollar companies in their dorm rooms. Jensen Huang launched Nvidia from a booth at Denny’s.
By contrast, on the other side of the Atlantic, regulations make it harder to build a business. There aren’t any companies in Europe comparable to the “Magnificent Seven” technology firms in the U.S., and there are just a handful elsewhere in the world. In the European Union, working hours are strictly limited. In 2023, when the French government tried to raise the official retirement age from 62 to 64, more than a million people took to the streets to protest.
Through this lens, the U.S. economy's outperformance seems to make sense. But this story may be oversimplified. Indeed, since the beginning of this year, markets in the U.S. have begun to falter. Domestic stocks are mostly in negative territory, while stocks outside the U.S. have delivered solid positive performance. This has people taking a second look at the question of American exceptionalism. Specifically, the question investors are asking is: To what degree should a portfolio be diversified internationally?
This isn’t such an easy question. Ask the Vanguard Group to construct a portfolio, and it’ll be split roughly 60-40 between domestic and international stocks. Vanguard’s view is that there’s no reason to favor any one country or region of the world over another, and thus investors’ portfolios should simply reflect the relative weightings of world markets. But Vanguard's founder, the late Jack Bogle, took an entirely different view. He didn’t hesitate to tell people that his personal portfolio was 100% domestic. U.S. stocks, he felt, were entirely sufficient.
There is, in short, no consensus on this question. Still, to gain clarity, we can consult the data.
In a 2023 paper titled “Still Not Crazy After All These Years,” hedge fund manager Cliff Asness examined the outperformance of domestic stocks, performing what’s known as attribution analysis to uncover the sources of that performance. His conclusion: The lion’s share of domestic stocks’ impressive gains over the prior 15 years wasn’t due to earnings growth. It wasn’t, in other words, due to the exceptionalism of American companies. Instead, those companies’ stocks had, for the most part, just become more expensive.
Even though U.S. stocks have given up some of their lead this year, that valuation gap is still very significant. Using the price-to-earnings (P/E) ratio as a measure, domestic stocks today are still 40% more expensive than their peers in developed markets outside the U.S.
Boosters of a domestic-only approach are quick to reply that American stocks deserve higher valuations. There is no "Magnificent Seven” anywhere outside the U.S., they argue, and these companies’ scale and impressive growth warrant higher valuations. But that argument quickly falls apart. As Asness points out, domestic and international stocks traded at comparable valuations as recently as 2007. The valuation gap is a new phenomenon.
According to the Swedroe analysis referenced above, another factor has contributed to domestic stocks’ outperformance: Between 2008 and 2024, the U.S. dollar appreciated nearly 20% against international currencies. This depressed the value of international stocks for U.S. investors, thus further boosting the relative performance of domestic stocks. There is, however, no guarantee that this trend will continue—and, indeed, it could reverse.
To be sure, there are unique aspects to the U.S. economy, and de Tocqueville’s observations have validity. But a quantitative analysis suggests that the extreme U.S. outperformance we’ve seen over the past dozen years may not continue indefinitely. Despite some erosion this year, domestic stocks still carry elevated valuations compared to international markets, and the U.S. dollar is still expensive. This is worth paying attention to, because ultimately valuations do matter. Investments that are expensive usually don’t offer the same prospective returns. That’s certainly what history suggests.
While it may be hard to remember, there have been multi-year periods when international stocks have outperformed the U.S. market. In fact, a chart of domestic vs. international stocks looks a little like a sine wave, with performance alternating over time. For that reason, I continue to recommend an allocation to international stocks. How much? I suggest something in the neighborhood of 20%. According to the data, that’s enough to deliver a diversification benefit, but not so much that it introduces significant currency risk.
A final note: You might notice that I haven’t mentioned the proximate cause of the valuation shifts we’ve seen this year—the new administration’s tariff policies. I’m not focusing on this specifically because I see it as just one example of how markets can shift unexpectedly. In choosing an international allocation—or any other aspect of your portfolio—I recommend taking the long view. My advice: Choose a structure that you think will make sense regardless of who is in the White House or where the economy happens to stand at any given time.
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.
They have a “purely practical” mindset, he wrote, and concluded that “the position of the American is quite exceptional.” In the years since, others have picked up on this concept of “American exceptionalism.”
Despite recent political and economic crosscurrents, the gap between the U.S. economy and its peers has only widened, especially over the past dozen years. Between 1990 and 2012, according to an analysis by author Larry Swedroe, corporate earnings in the U.S. grew no faster than in other countries.
But since 2012, American companies’ profits have multiplied while—in aggregate—international companies’ earnings have stagnated. As a result, markets in the U.S. have far outpaced their international peers. This has made investing outside the U.S. feel like a losing proposition for quite some time.
On the surface, this seems easy to explain. In the U.S., entrepreneurship is key to our DNA, and our regulatory regime makes it easy to get a business started. Hewlett and Packard got their start in Packard’s garage. Gates and Zuckerberg founded trillion-dollar companies in their dorm rooms. Jensen Huang launched Nvidia from a booth at Denny’s.
By contrast, on the other side of the Atlantic, regulations make it harder to build a business. There aren’t any companies in Europe comparable to the “Magnificent Seven” technology firms in the U.S., and there are just a handful elsewhere in the world. In the European Union, working hours are strictly limited. In 2023, when the French government tried to raise the official retirement age from 62 to 64, more than a million people took to the streets to protest.
Through this lens, the U.S. economy's outperformance seems to make sense. But this story may be oversimplified. Indeed, since the beginning of this year, markets in the U.S. have begun to falter. Domestic stocks are mostly in negative territory, while stocks outside the U.S. have delivered solid positive performance. This has people taking a second look at the question of American exceptionalism. Specifically, the question investors are asking is: To what degree should a portfolio be diversified internationally?
This isn’t such an easy question. Ask the Vanguard Group to construct a portfolio, and it’ll be split roughly 60-40 between domestic and international stocks. Vanguard’s view is that there’s no reason to favor any one country or region of the world over another, and thus investors’ portfolios should simply reflect the relative weightings of world markets. But Vanguard's founder, the late Jack Bogle, took an entirely different view. He didn’t hesitate to tell people that his personal portfolio was 100% domestic. U.S. stocks, he felt, were entirely sufficient.
There is, in short, no consensus on this question. Still, to gain clarity, we can consult the data.
In a 2023 paper titled “Still Not Crazy After All These Years,” hedge fund manager Cliff Asness examined the outperformance of domestic stocks, performing what’s known as attribution analysis to uncover the sources of that performance. His conclusion: The lion’s share of domestic stocks’ impressive gains over the prior 15 years wasn’t due to earnings growth. It wasn’t, in other words, due to the exceptionalism of American companies. Instead, those companies’ stocks had, for the most part, just become more expensive.
Even though U.S. stocks have given up some of their lead this year, that valuation gap is still very significant. Using the price-to-earnings (P/E) ratio as a measure, domestic stocks today are still 40% more expensive than their peers in developed markets outside the U.S.
Boosters of a domestic-only approach are quick to reply that American stocks deserve higher valuations. There is no "Magnificent Seven” anywhere outside the U.S., they argue, and these companies’ scale and impressive growth warrant higher valuations. But that argument quickly falls apart. As Asness points out, domestic and international stocks traded at comparable valuations as recently as 2007. The valuation gap is a new phenomenon.
According to the Swedroe analysis referenced above, another factor has contributed to domestic stocks’ outperformance: Between 2008 and 2024, the U.S. dollar appreciated nearly 20% against international currencies. This depressed the value of international stocks for U.S. investors, thus further boosting the relative performance of domestic stocks. There is, however, no guarantee that this trend will continue—and, indeed, it could reverse.
To be sure, there are unique aspects to the U.S. economy, and de Tocqueville’s observations have validity. But a quantitative analysis suggests that the extreme U.S. outperformance we’ve seen over the past dozen years may not continue indefinitely. Despite some erosion this year, domestic stocks still carry elevated valuations compared to international markets, and the U.S. dollar is still expensive. This is worth paying attention to, because ultimately valuations do matter. Investments that are expensive usually don’t offer the same prospective returns. That’s certainly what history suggests.
While it may be hard to remember, there have been multi-year periods when international stocks have outperformed the U.S. market. In fact, a chart of domestic vs. international stocks looks a little like a sine wave, with performance alternating over time. For that reason, I continue to recommend an allocation to international stocks. How much? I suggest something in the neighborhood of 20%. According to the data, that’s enough to deliver a diversification benefit, but not so much that it introduces significant currency risk.
A final note: You might notice that I haven’t mentioned the proximate cause of the valuation shifts we’ve seen this year—the new administration’s tariff policies. I’m not focusing on this specifically because I see it as just one example of how markets can shift unexpectedly. In choosing an international allocation—or any other aspect of your portfolio—I recommend taking the long view. My advice: Choose a structure that you think will make sense regardless of who is in the White House or where the economy happens to stand at any given time.
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 No Exception appeared first on HumbleDollar.
New in 2025 – Code Y on 1099-R box 7 for QCD’s
https://www.irs.gov/pub/irs-dft/i1099...
On April 15, 2025 the IRS issued draft instructions for the 2025 version of form 1099-R with a new box 7 code of "Y" to indicate the distribution is a qualified charitable distribution (QCD).
A good addition in my opinion.
The post New in 2025 – Code Y on 1099-R box 7 for QCD’s appeared first on HumbleDollar.
Going against the grain
From an early age, we are influenced by our parents, friends, relatives and society in general to get us on the treadmill of achieving success. By the time we are in college, career choice and what we want to do with our life have been heavily influenced by everyone around us. After several decades of pursuing someone else's dream, it is hard to switch and focus on what we really want to do. It is too late and most just carry on.
I am no exception. I followed what was expected of me, worked hard and achieved some success in my career. No regrets. If I had chosen a different path, would it have been better? Not sure, and I will never know. Retirement gives me freedom to ask fresh questions now and choose what I want to do.
Did you just fulfill the expectations that others had for you, or did you go against the grain and chart your own course? This could include choosing a career, partner, buying a home, having children or making investment choices. How did it turn out?
I am no exception. I followed what was expected of me, worked hard and achieved some success in my career. No regrets. If I had chosen a different path, would it have been better? Not sure, and I will never know. Retirement gives me freedom to ask fresh questions now and choose what I want to do.
Did you just fulfill the expectations that others had for you, or did you go against the grain and chart your own course? This could include choosing a career, partner, buying a home, having children or making investment choices. How did it turn out?
The post Going against the grain appeared first on HumbleDollar.
This may be my shortest rant and contribution to HD and it’s about old folk.
We seniors do not DESERVE anything from society or government. This is especially true when giving extra benefits to seniors takes away from younger generations or shifts more tax burden to them.
We do deserve to receive what we contributed toward and were promised by law - Social Security, Medicare, but that also applies to every American.
The vocal movement on social media to eliminate property taxes for citizens age 65 + is especially disturbing to me - along with tax-free Social Security. The vast majority of comments support the idea.
Without eliminating vital local services along with taxes, how do these greedy oldies propose paying for schools and more?
We had a lifetime to prepare for our non-working years. Our relative financial position over age 65 reflects our economic status during our working years regardless of where that falls.
IMO it’s just not fair to take more from the following generation.
The post This may be my shortest rant and contribution to HD and it’s about old folk. appeared first on HumbleDollar.
Tasting Retirement
I'M TRYING MY HAND at retirement. It isn’t going so well.
As a teenager and when I was in my early 20s, I would take to the couch and happily spend the day consuming a novel. Could I do that at age 62? It seems not.
At some point over the past four decades, I lost the ability to do things solely for my own enjoyment. It seems the endless demands of work, family and household chores have crushed my inner self-absorbed teenager. Am I missing out? I’m not sure.
Sleeping in. This is relative. Before my diagnosis, I’d regularly get up at 5 a.m. Today, I’ll often stay in bed past 6. This is partly a conscious attempt to sleep more and partly because my body needs more sleep. My cancer, coupled with my treatment, can leave me feeling pretty fatigued.
Still, after decades of getting seven hours of sleep a night and often less, it feels like a great luxury to linger longer in bed. This is one part of my “retirement” that I’ve successfully embraced.
Travel. Since my diagnosis 11 months ago, Elaine and I have visited Ireland (twice), London and Paris, gone on a cruise, taken the kids and their families for a long weekend at a luxury resort, and made a number of shorter trips to places nearby. Many dollars have been spent. Has it been worth it? Some of the trips have been great. Others have been more of a struggle.
Since late October, my mobility has been all over the map, a result of the cancer spreading to my spine. At its worst, I could barely walk a city block. After radiation treatment, I can almost feel like my old self, and have no problem walking. Even then, fatigue is an issue, and it’s especially bad when coupled with the changing time zones that accompany transatlantic trips.
Before my diagnosis, Elaine and I had a wish list of places we wanted to visit, perhaps staying for weeks at a time. But those travel dreams have been largely nixed. It’s been tough for me to leave town for more than a week or so, given my endless medical appointments.
All this is a reminder of what I’ve often read from HumbleDollar commenters, which is that retirees should travel while they can, because you never know when deteriorating health might steal that from you.
Television. I’m ambivalent about TV, inclined to view it as a passive activity that usually isn’t worth the time invested. Still, in recent months, I’ve started to watch sports on TV every so often, something I stopped doing more than 25 years ago. Elaine and I also occasionally watch an episode of our latest TV series during the middle of the day, which feels like the height of decadence. I may even pay to stream July’s Tour de France, though I’m not sure I want to commit the necessary hours to take full advantage.
Family. With my diagnosis, my family—my two kids, my mother, my three siblings—have rallied around me. We speak more often on the phone and see each other more frequently. If there’s an upside to my illness, this is it.
Still, I’m not sure all of the above amounts to much of a retirement. Don’t I have any hobbies, you might wonder? I did—bicycling—and I imagined retirement would give me the chance to explore the Pennsylvania countryside on two wheels. But because I've had balance issues, the doctors ordered me to stop riding outside when I got my diagnosis, so the only cycling I do these days is in the basement.
Any other hobbies? The problem, and I’m not sure it is one, is that my hobby is my work. I no longer spend my days editing articles for HumbleDollar. Those edited articles have been replaced by the pieces that the site’s readers post directly to the Forum.
But while I’m no longer editing, I still devote part of each day to various writing projects and to monitoring activity on HumbleDollar. I enjoy it, and I think it’s a worthy use of my time. But I’m not sure others would consider what I do each day to be anything akin to retirement.
Is there a lesson here? Perhaps. While HumbleDollar might be a community united by a desire to discuss financial issues in a civil and intelligent manner, the debates within the Forum highlight readers’ many differences. Among them: the virtues of budgeting, the wisdom of investing abroad, when to claim Social Security, whether to favor individual bonds over bond funds, how much to travel, the desirability of continuing care retirement communities, whether to buy income annuities, and much more.
Similarly, there’s no one definition of retirement, and what makes others happy likely won’t work for you and me. Don’t like the way others are spending their retirement? That’s an easy one: Don’t do what they’re doing.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier posts.
As a teenager and when I was in my early 20s, I would take to the couch and happily spend the day consuming a novel. Could I do that at age 62? It seems not.
At some point over the past four decades, I lost the ability to do things solely for my own enjoyment. It seems the endless demands of work, family and household chores have crushed my inner self-absorbed teenager. Am I missing out? I’m not sure.
Sleeping in. This is relative. Before my diagnosis, I’d regularly get up at 5 a.m. Today, I’ll often stay in bed past 6. This is partly a conscious attempt to sleep more and partly because my body needs more sleep. My cancer, coupled with my treatment, can leave me feeling pretty fatigued.
Still, after decades of getting seven hours of sleep a night and often less, it feels like a great luxury to linger longer in bed. This is one part of my “retirement” that I’ve successfully embraced.
Travel. Since my diagnosis 11 months ago, Elaine and I have visited Ireland (twice), London and Paris, gone on a cruise, taken the kids and their families for a long weekend at a luxury resort, and made a number of shorter trips to places nearby. Many dollars have been spent. Has it been worth it? Some of the trips have been great. Others have been more of a struggle.
Since late October, my mobility has been all over the map, a result of the cancer spreading to my spine. At its worst, I could barely walk a city block. After radiation treatment, I can almost feel like my old self, and have no problem walking. Even then, fatigue is an issue, and it’s especially bad when coupled with the changing time zones that accompany transatlantic trips.
Before my diagnosis, Elaine and I had a wish list of places we wanted to visit, perhaps staying for weeks at a time. But those travel dreams have been largely nixed. It’s been tough for me to leave town for more than a week or so, given my endless medical appointments.
All this is a reminder of what I’ve often read from HumbleDollar commenters, which is that retirees should travel while they can, because you never know when deteriorating health might steal that from you.
Television. I’m ambivalent about TV, inclined to view it as a passive activity that usually isn’t worth the time invested. Still, in recent months, I’ve started to watch sports on TV every so often, something I stopped doing more than 25 years ago. Elaine and I also occasionally watch an episode of our latest TV series during the middle of the day, which feels like the height of decadence. I may even pay to stream July’s Tour de France, though I’m not sure I want to commit the necessary hours to take full advantage.
Family. With my diagnosis, my family—my two kids, my mother, my three siblings—have rallied around me. We speak more often on the phone and see each other more frequently. If there’s an upside to my illness, this is it.
Still, I’m not sure all of the above amounts to much of a retirement. Don’t I have any hobbies, you might wonder? I did—bicycling—and I imagined retirement would give me the chance to explore the Pennsylvania countryside on two wheels. But because I've had balance issues, the doctors ordered me to stop riding outside when I got my diagnosis, so the only cycling I do these days is in the basement.
Any other hobbies? The problem, and I’m not sure it is one, is that my hobby is my work. I no longer spend my days editing articles for HumbleDollar. Those edited articles have been replaced by the pieces that the site’s readers post directly to the Forum.
But while I’m no longer editing, I still devote part of each day to various writing projects and to monitoring activity on HumbleDollar. I enjoy it, and I think it’s a worthy use of my time. But I’m not sure others would consider what I do each day to be anything akin to retirement.
Is there a lesson here? Perhaps. While HumbleDollar might be a community united by a desire to discuss financial issues in a civil and intelligent manner, the debates within the Forum highlight readers’ many differences. Among them: the virtues of budgeting, the wisdom of investing abroad, when to claim Social Security, whether to favor individual bonds over bond funds, how much to travel, the desirability of continuing care retirement communities, whether to buy income annuities, and much more.
Similarly, there’s no one definition of retirement, and what makes others happy likely won’t work for you and me. Don’t like the way others are spending their retirement? That’s an easy one: Don’t do what they’re doing.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier posts.The post Tasting Retirement appeared first on HumbleDollar.
April 24, 2025
My Favorite Election
To clarify I mean my favorite tax election.
For me, a popular choice is the IRC section 266 election to capitalize carrying costs. Many times you may have a current year expense that while technically deductible in the current year does not provide you any current year tax benefit. In such cases the IRC 266 election, if available to you, allows you to capitalize certain expenses thereby increasing the basis of certain land and thus the election means you may reduced taxable gain at the point in the future when the land is sold. Think property taxes, interest, maintenance and other carrying costs on undeveloped land you or your business is holding for investment purposes.
If you want to read an expanded article the below link to an article by Dr. James R. Hasselback, a retired tax professor, may be a worthwhile read.
http://www.jrhasselback.com/Blog/CarryingCosts-Outline.pdf
Best, Bill
For me, a popular choice is the IRC section 266 election to capitalize carrying costs. Many times you may have a current year expense that while technically deductible in the current year does not provide you any current year tax benefit. In such cases the IRC 266 election, if available to you, allows you to capitalize certain expenses thereby increasing the basis of certain land and thus the election means you may reduced taxable gain at the point in the future when the land is sold. Think property taxes, interest, maintenance and other carrying costs on undeveloped land you or your business is holding for investment purposes.
If you want to read an expanded article the below link to an article by Dr. James R. Hasselback, a retired tax professor, may be a worthwhile read.
http://www.jrhasselback.com/Blog/CarryingCosts-Outline.pdf
Best, Bill
The post My Favorite Election appeared first on HumbleDollar.
I want to see less of me on the internet
There is an excellent article in the Wall Street Journal about how to find what there is about you on the internet and how to delete it if you want. Here is the Link.
I read the article followed the suggestions and it was very easy. I hope it works. Has anyone tried this?
The post I want to see less of me on the internet appeared first on HumbleDollar.
April 23, 2025
Forfeiture laws vs. Tax laws
The link below is to an interesting, to me, Sixth Circuit Court of Appeals tax case that was published March 19, 2025 titled
Hubbard v. Comm’r of Internal Revenue
https://www.opn.ca6.uscourts.gov/opin...
I was not previously aware that there are two types of criminal forfeitures and the impact, at least so far, determined the taxability of a IRA distribution after forfeiture when the forfeiture order identifies the “specific property” (the IRA among other things) that the defendant must relinquish. Apparently, the government becomes the owner of this property at the time of a conviction per this Court of Appeals and Hubbard did not have taxable income event when the IRS withdrew the $400K+ from his former IRA.
In the non criminal arena this case comments that if you have been swindled out of an IRA by theft and then to add insult to injury you get a 1099-R saying you have taxable income from the IRA distribution you did not receive that there is case law you may reference when preparing your return and excluding that income and when/if you get correspondence from the IRS. See that case reference on page 9 of the link titled Balint v. Comm’r.
However, I do not believe it was economic thinking to bring this tax case after the district court had already ordered
Hubbard to serve decades in prison for illegally operating an illegal “pill mill”, but rather to send a message that doing so will mean you will lose everything.
Hubbard v. Comm’r of Internal Revenue
https://www.opn.ca6.uscourts.gov/opin...
I was not previously aware that there are two types of criminal forfeitures and the impact, at least so far, determined the taxability of a IRA distribution after forfeiture when the forfeiture order identifies the “specific property” (the IRA among other things) that the defendant must relinquish. Apparently, the government becomes the owner of this property at the time of a conviction per this Court of Appeals and Hubbard did not have taxable income event when the IRS withdrew the $400K+ from his former IRA.
In the non criminal arena this case comments that if you have been swindled out of an IRA by theft and then to add insult to injury you get a 1099-R saying you have taxable income from the IRA distribution you did not receive that there is case law you may reference when preparing your return and excluding that income and when/if you get correspondence from the IRS. See that case reference on page 9 of the link titled Balint v. Comm’r.
However, I do not believe it was economic thinking to bring this tax case after the district court had already ordered
Hubbard to serve decades in prison for illegally operating an illegal “pill mill”, but rather to send a message that doing so will mean you will lose everything.
The post Forfeiture laws vs. Tax laws appeared first on HumbleDollar.
RDQ Sorry folks, I still see annuities, including deferred annuities, as a viable option for creating steady retirement income.
This doesn’t mean you put all your eggs in the annuity basket. You still take advantage of other retirement vehicles and accumulate assets, but adding to the guaranteed Social Security income stream with an annuity seems like a good idea for many, perhaps most retirees.
Certainly do it yourself investing, even withdrawing when retired, offer no guarantees - and a lot of planning and projecting that are challenges for many people - especially those who don’t read HD.
I know annuities get a bad rap, but even considering the potential lower return than investing, the annual fees (According to Morningstar Annuity Research Center, variable annuity annual fees range widely, with an industry average of 1.05%), surrender charges and possible early withdrawal limits, why wouldn’t you want to create your own pension by making annual contributions to an annuity over your working life?
Clearly, you must start with the intent of not making an early withdrawal, not stopping contributions within any penalty period. It’s a very long term commitment, just like working many years for an employer to accumulate pension value.
Those of us with a pension - an annuity we may or may not have contributed toward - know the less stress feeling of a steady monthly income, a monthly payday so to speak. An annuity isn’t an investment- except in peace of mind. I can’t think of a better way to pay the bills in retirement.
Certainly do it yourself investing, even withdrawing when retired, offer no guarantees - and a lot of planning and projecting that are challenges for many people - especially those who don’t read HD.
I know annuities get a bad rap, but even considering the potential lower return than investing, the annual fees (According to Morningstar Annuity Research Center, variable annuity annual fees range widely, with an industry average of 1.05%), surrender charges and possible early withdrawal limits, why wouldn’t you want to create your own pension by making annual contributions to an annuity over your working life?
Clearly, you must start with the intent of not making an early withdrawal, not stopping contributions within any penalty period. It’s a very long term commitment, just like working many years for an employer to accumulate pension value.
Those of us with a pension - an annuity we may or may not have contributed toward - know the less stress feeling of a steady monthly income, a monthly payday so to speak. An annuity isn’t an investment- except in peace of mind. I can’t think of a better way to pay the bills in retirement.
The post RDQ Sorry folks, I still see annuities, including deferred annuities, as a viable option for creating steady retirement income. appeared first on HumbleDollar.
Top Five Expense Categories and Inflation Factor
Dan’s post ‘Insomnia and the Back of an Envelope’ motivated me to review our expenses. Our top five categories are property taxes, home/car insurance, utilities, groceries, and healthcare premiums/deductibles.
Our home property taxes increased 23% from 2023 to 2025 while our home value increase 17%. The value of our ten-acre plot went down 1.6% from 2023 to 2024, but then increased 23.5% from 2024 to 2025 and property taxes increased by 30%.Home insurance went up 46% from 2023 to 2025, while the insured value went up 8%. The car insurance remained unchanged (my car insurance went down $6 and my husband’s went up $59). Surprisingly, our umbrella insurance went up 30% from 2024 to 2025. (no claims, no accidents, no tickets)Electric was up 15% even though our usage dropped 1.3% from 2023 to 2024. The other utilities only went up 1%My healthcare premiums (Medicare Supplement) went up 9.5% from 2023 to 2024, but my husband’s (Medicare Advantage) remained unchanged. Our dental insurance went up 8.1%. I haven’t seen the increases yet for 2025. The Part B Medicare premium increased from $164.90 in 2023 to $174.70 (5.9%) in 2024, and to $185 (5.9%) in 2025. The Part B Medicare deductible increased from $226 in 2023 to $240 (6.2%) in 2024, and to $257 (7%) in 2025.These categories make up over half our spending. Adding in groceries gives me the top 5 line items of our spending. Home maintenance hasn’t been an issue since we recently built, but over time, that could be a contender. So going forward, I’ll continue to track these top 5 categories. (Kinda the 80/20 rule.)
In the past, I’ve used a 3% inflation factor to forecast expenses. What inflation factor do you build into your assumptions? Are you seeing higher percentage increases in your top 5 categories of spending?
The post Top Five Expense Categories and Inflation Factor appeared first on HumbleDollar.
