Jonathan Clements's Blog, page 80

Wrong Number

WE BOUGHT A SAILBOAT and trailer in 2008 for our son for his 15th birthday. At the time, he was too young to own a boat, so I registered it in my name.

Fast forward 15 years, and we finally got around to transferring the title to our son. Transferring the boat was quick and easy. Transferring the trailer was not.

Cars, trucks boats and trailers all have unique vehicle identification numbers, or VINs. In this case, it’s a 17-digit number.

The first number of the VIN engraved on the trailer is a five. The seller sent in the title transfer paperwork, which included the VIN number and which I signed. Two weeks later, I got the title from the state. Everything was correct, except the VIN started with a four—something I didn’t notice at the time.

When we tried to transfer the title to our son 15 years later, we discovered the state had ownership records for the various VINs—but I wasn’t listed as the owner of any of them. Compounding the confusion, the state upgraded its computer system in 2008, and it’s now difficult to get information from that time.

Fortunately, I still had the original bill of sale, the original title transfer, and the title that I'd received from the state. The state asked me to produce:

A photo of the trailer’s VIN
A photo of the license plate
Photos of each side of the trailer, both a hard copy and a digital file
A statement of how I came to own a trailer with no previous transfer of title on record, with the statement also signed by the original seller

Fortunately, I'd purchased the boat on consignment from a well-known boat dealer that’s still in business. When I showed the boat dealership all of the photos and original paperwork, an employee had no problem signing the statement. 

I took all of this information to the license center. After about an hour consulting with the department of motor vehicles, calling the seller and running a background check on me, the license center was able to give me clear title to the trailer. All told, I spent about six hours cleaning up the mess.

If I had to do all of this for a trailer, I can't imagine what an ordeal it would have been for an automobile. Needless to say, I'll be double checking the VIN on any future purchases.

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For Love or Money

"I CAN'T GET DIVORCED."

“But Randy, I thought you guys were moving toward one.”

“I mean, I can’t afford to. I just went to see my accountant and a lawyer.”

“And?”

“Remember, California is a community property state. Even though I made almost all our money, Sarah’s entitled to half of it. I know she was dedicated to raising Harris all those years, but wow, Steve, I’m cooked.”

“But you were such a sought-after internist. You must have had a fantastic income.”

“Yeah, usually almost $250,000.”

“So, what’s the problem? You own a beautiful home and a spiffy ski chalet, and I know you have a Roth IRA. My guess is you have about $5 million in net assets. So what’s wrong with 2.5? You planning a swinging retirement or something?”

“Steve-o, it’s not 2.5. I’ve got just $2 million total in cash and mutual funds and some bonds.”

“But what about your house here and that luxurious A-frame? There’s got to be some major bucks there.”

“Not really, even though that mountain retreat is paid off and would go for about a million. But I want to keep living in it myself, at least for as long as the separation goes on. Sarah will stay here.”

“Okay, and that house is in a primo neighborhood and worth maybe another full million.”

“You’re right, Steve. We just had it appraised for $950,000. But there’s a catch, a big one. It’s got a $450,000 loan on it. So, if I get the chalet, I’ll have to come up with half the difference in equity between the chalet and Sarah’s home here.”

“So, your take would be half of the $2 million that’s liquid, minus maybe $250,000.”

“Yup, so I’m left with $750,000 in cash. I’m 73 and fairly healthy. My parents both died at 91, so I could have almost 20 years left.”

“And the most income you can safely get on the $750,000 is about $30,000 a year. Even with Social Security, you’ll need to cut way into your principal.”

“It’s worse than that. The $750,000 will only give me a few years of a decent retirement. Don’t I deserve one after doing a thousand physicals over 40 years?”

“Yeah, Randy, you do. But you’ll eventually have to tap into the equity in your chalet as the last line of defense for a rewarding retirement. And if you don’t cool it with your lifestyle, there may even be a part-time job waiting for you. How did everything get so out of hand?”

“It wasn’t any one thing. It was a pattern. Although my parents were well-to-do, they were stingy. I didn’t live in as good a neighborhood or have the kind of clothes the kids in my high school did. Mom and Dad drove two clunkers. When I became a doctor, I decided it was going to be my turn. We purchased a charming old Normandy home and did a fabulous remodel of our kitchen and master bath. Sarah likes antiques, so we bought period furniture and invested in some art. You know I’m into high-profile cars, like my Jag. We always flew first class, stayed in four- and five-star hotels written up in Conde Nast Traveler and we ate in Zagat-rated restaurants. Steve, I have my suits custom-made.”

“I get the picture, Randy. You overcompensated for your parents’ penny-pinching with lavish spending on yourself. Now, you’re paying the piper. What can I say? I’m sorry about the mess you’re in.”

“Yeah, thanks Steve-o.”

“But what happened with you and Sarah?”

“It was just a gradual fizzle. We went from lovers to friends and then to mutual alienation. The killer for me was her dog fetish. Her obsession with breeding them required a ton of caretaking and over-the-top expense. It got to where I felt she enjoyed walking the dogs more than she wanted to walk with me. That’s when I decided to leave and live at the resort.”

“And you can’t get divorced because you’ll be left hanging financially.”

“Yup, and that’s not all. I’ve played drums in a local rock band ever since I moved up to the chalet three years ago. About three months ago, we got a new guitarist. Heather and I became friends, and now we’re really close and thinking about living together. I feel badly about not telling Sarah about all this weeks ago and plan on calling her tonight. But, Steve, I’m afraid she’ll file. I’d be broke and, frankly, a little scared. But unless I divorce her, Heather won’t live with me.”

“Oh my gosh, what a dilemma. Your money and your relationships are spinning out of control. And then there’s the whole guilt thing.”

“You’ve got the program. I can tell Heather I’m unwilling to get a divorce, and get back together with Sarah. The marriage would be very compromised, but at least it would rest on years of devotion. It would be safe and spare me from financial Armageddon. Heather is a blast to be with, but I’m afraid the honeymoon phase will fade, and I’d be left unhappy and with a barebones retirement. All this is dragging me down and my old college shoulder twitch is back.”

This conversation is a small embellishment of a recent phone call with a close friend, whose identity has been protected. Feeling materially deprived and humiliated in his youth, Randy chose to live above his means. Instead of the extravagant retirement he once imagined, he must now contend with the powerful and often conflicting forces of love, devotion, money and morality.

Steve Abramowitz is a psychologist in Sacramento, California. Earlier in his career, Steve was a university professor, including serving as research director for the psychiatry department at the University of California, Davis. He also ran his own investment advisory firm. Check out Steve's earlier articles.

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Words Escape Me

I'M A TERRIBLE READER. I have been my entire life. This was very upsetting to my mother, who felt reading was the key to success.

In fact, my entire family were great readers. Sunday’s New York Times was a fixture in my parents’ house. They’d spend hours reading every section. I hated it.

My father was born in the Hell’s Kitchen section of New York City. He attended Purdue University, studying chemical engineering, but didn’t graduate. Still, he loved to read. I was told by one of his school buddies that my father would buy a paperback and read it while waiting for his friend to arrive. When the friend arrived, he’d tear out the section he just read, throw it away and stuff the rest in his pocket.

My mother was determined to make me a great reader. She invested a good deal of money sending me to private reading programs, with the goal of increasing my reading speed and comprehension. It didn’t work.

I had to work hard to get through school and college. I chose mathematics as my major because there was less reading, while my minor was economics, so I could better understand money. My post-graduate insurance studies involved a great deal of reading. All this work. All this reading. It was maddening.

To this day, when I have time available and I feel like reading, it’ll usually be something that has a practical benefit. I also enjoy reading biographies. I’ve always found learning about other people's lives, and how and why they did what they did, fascinating.

These biographies have included those of industrial giants like Andrew Carnegie, who emigrated to America, made a fortune and gave it all away. Or his righthand man, Charles M. Schwab, who was paid $1 million a year by Andrew Carnegie but died a pauper because of his lifestyle of wine, women and song.

I’ve also read about famous investors like Warren Buffett and Charlie Munger. I wanted to learn how they could make so much money when we mere mortals can’t. And I’ve read the stories of successful casino gamblers and blackjack players, and how they did it. Hint: They all have an angle that tilts the odds in their favor.

My No. 1 nonfiction type of reading is financial. But in picking books, my focus wasn’t how to get rich or how to make a killing on Wall Street. Rather, I was focused on how not to go broke. One area I’ve found especially informative is behavioral finance. I’m interested in how my own behavior can trip me up.

I wish I could tell you I’ve identified the behavioral traps I fall prey to and I now avoid them. But the truth is, I still make mistakes. That’s okay. I know I’m not perfect. I just don’t want to be broke.

No matter how smart or educated we are, we’re all human and hence prone to mistakes. I’d recommend every investor of behavioral finance traps and keep them in mind. These mistakes will undoubtedly cause us pain, but hopefully the results won’t be catastrophic, like the financial pain caused by compulsive gambling or compulsive trading.

Every time I read a book, even those I enjoy, it doesn’t take me long to become sleepy. This was a problem when I needed to read for school, but it isn’t anymore. Being retired, I have the freedom to do anything I want. Sleeping is no exception. Taking a one-hour nap is wonderful. For those of you who fight your body when it tells you it’s time to sleep, I’d advise listening to your body. It is much smarter than you are—and it knows what you need.

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What the Data Say

IN THE INVESTMENT world, there’s no shortage of data. But how useful is all that data? To help get to an answer, let’s consider four questions:

1. When the economy is strong, is that good for stocks? The simple answer is “yes.” According to textbook finance, the value of any company should represent the sum total of its future profits. When the economy is strong and profits are higher, that should be good for stocks. Over time, in fact, the trajectory of the stock market has generally followed the trajectory of corporate profits.

But sometimes a strong economy can drive share prices lower. This happened just a few years ago. The economy was recovering from 2020's pandemic, employment was improving and corporate profits were rising. But that strength contributed to higher wages and, together with other factors, the result was rising inflation. As a result, the Federal Reserve had to step in, raising rates to put the brakes on inflation.

The Fed succeeded in bringing down inflation, but those rate hikes—seven increases in one year—also caused the stock market to drop. In 2022, stocks fell 18%. This, in short, is the nature of economic cycles. A strong economy and a strong stock market tend to go together—but, at a certain point, too much positive economic data can actually be bad for stocks.

The bottom line: Be cautious in drawing conclusions about where the stock market might be headed based on current economic conditions.

2. If the stock market’s price-to-earnings (P/E) ratio is high, does that mean share prices are too high? Again, the simple answer is “yes.” While imperfect, the market’s price-to-earnings ratio can be a rough indicator of future market returns. In early 2000, for example, just before the market began to slide, the S&P 500’s P/E ratio stood at nearly 30. To put that in perspective, the market’s long-term average P/E has been about 17. In that case, an elevated P/E was indeed an accurate indicator. The market was too high and ultimately fell nearly 50%.

But if we had revisited the P/E ratio in the midst of that downturn, it would have sent a confusing signal. At the end of 2001, by which time the market had already dropped 25%, the P/E had actually risen to 46. Why, after a big market decline, would the P/E have risen? It seems like simple math that if prices had dropped, the market’s P/E should also have dropped.

The answer lies on the other side of the ratio. When the economy goes into recession, as it did in 2001, Wall Street analysts’ earnings estimates drop as well. If those estimates drop more than share prices, that can cause the market’s P/E ratio based on forecasted corporate profits to rise during a market downturn. We saw the same thing in 2009. The key point: While P/E values have a bit of predictive power, they can be misleading.

3. If the federal government is running enormous deficits, does that mean tax increases are a foregone conclusion? The federal budget deficit today is closing in on 100% of GDP, a level we haven’t seen since the 1940s. Even if Congress had the political will, cutting spending wouldn’t be easy. Social Security and Medicare account for 47% of the budget. Defense is another 14% and, because of the accumulated debt from prior years’ deficits, interest on the debt accounts for another 13% of spending.

That doesn’t leave a lot of room to maneuver and, as a result, many worry that taxes will need to rise, even above the increases already scheduled for 2026. It’s not an unreasonable fear—but things don’t necessarily have to go that way.

In the late 1980s, as we fought the last years of the Cold War, budget deficits rose to worrying levels. But that didn’t result in tax increases. Why? As the tech boom of the 1990s got going, government revenue swelled, and the debt load began to fall. At one point in the mid-1990s, the government actually ran a budget surplus. To be sure, current trends aren’t reassuring, but trends can reverse.

4. If international stocks have lower P/E ratios than U.S. stocks, does that make them more attractive? On the surface, this sounds compelling. The U.S. stock market’s P/E today is just above 20, while in developed markets outside the U.S. the average P/E is just 14. To many, this means international stocks are a bargain. But that’s not the only explanation.

As we saw earlier, a lower P/E doesn’t guarantee higher investment returns. But that’s not the only reason P/E ratios can be misleading. Another reason is that stock markets differ from country to country.

That’s important because there’s an underlying connection between a company’s growth rate and its P/E ratio. Consider two companies: Microsoft and food manufacturer General Mills. Microsoft’s P/E today is 33, while General Mills’s is around 16. But that doesn’t mean General Mills is cheap, and Microsoft is expensive. Rather, it reflects the difference between a company growing at 15% to 20% per year (Microsoft) and one that’s just barely growing (General Mills). In short, P/E ratios tend to reflect the growth rate of the business.

That helps explain why the average P/E in the U.S. is so much higher than in most of the rest of the world. International markets have far fewer fast-growing technology companies. In the U.S., seven of the top 10 companies are in technology. But in Europe, just two of the top 10 are tech companies. The same is true in most of the rest of the world. In Europe, the biggest companies are mostly slow-growing banks, food and energy companies. That explains why international markets generally have lower P/E multiples than in the U.S. Through this lens, in other words, international markets aren’t necessarily a bargain; they’re just appropriately priced for what they are.

Last week, the investment world lost a giant: James Simons, the founder of Renaissance Technologies. According to Gregory Zuckerman’s The Man Who Solved the Market, Renaissance’s flagship Medallion Fund delivered average returns of 66% per year over a 31-year period—by far, the best investment returns achieved by any investor ever.

How did Simons do it? Renaissance was the first to sift through market data, looking for hidden patterns and correlations. But despite its astonishing returns, according to an employee quoted in Zuckerman’s book, Renaissance’s system was still only right 50.75% of the time. I think there’s an important lesson in this: If even the most successful data analysts in the world are still only right 50.75% of the time, it illustrates just how hard it is to draw conclusions from market data. That's why the best approach, in my view, is to structure a reasonable portfolio and to stick with it, despite what the data say—or appear to be saying.

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 on Threads, and check out his earlier articles.

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Playing Their Part

OUR RETIREMENT INCOME is built on a slew of financial products and strategies. But we should think less about the gory details of each—and more about the role they play in our overall retirement finances.

The fact is, while each of us comes to retirement with different levels of wealth and different desires, we all want both a sense of financial security today and confidence about our financial future. How can we best meet those twin goals? We might think about our retirement finances in terms of seven dimensions:

1. Setting a floor. Arguably, our fixed living costs should be the starting point for our retirement-income plan—because, if we’re struggling to cover property taxes, insurance premiums, utilities, grocery bills and other recurring costs, our final years will likely be awash with financial stress.

To that end, we should figure out how much we need each year to, quite literally, keep the lights on. Would it be prudent to reduce that annual nut? This, of course, is the reason folks downsize, sometimes coupled with moving to a lower-cost and lower-tax state.

2. Building in flexibility. Fixed costs have to be paid. But discretionary spending—we’re talking fun stuff like travel, eating out, concerts and more—is easily cut. No, we don’t want to nix next year’s trip to Hawaii. But varying our discretionary spending is an important financial lever, one we may have to use if we get hit with, say, hefty medical expenses or brutally bad financial markets. What would we cut if our financial life took a turn for the worse? Each of us should have some sense of our spending priorities.

3. Buying predictability. Where will we get our retirement’s spending money? It could either come from selling assets—our home, stocks, bonds, cashing out part of a savings account—or via regular income. The latter might include dividends from stocks, interest from bonds, pension income, annuity income and Social Security.

It can be a mistake to invest solely for income by, say, chasing higher-yielding investments. Still, receiving ample regular income can make retirement less financially stressful, and it’s a reason folks might want to delay claiming Social Security to get a larger monthly check, and perhaps also purchase immediate-fixed annuities.

4. Cushioning crashes. Many retirees focus less on generating regular income and more on gunning for growth, with an eye to periodically cashing out stocks and bonds to pay living expenses. What if we get a year like 2022, when both stocks and bonds got pummeled? As a precaution, consider setting aside five years’ worth of required portfolio withdrawals as a financial safety net. We might stash these dollars in money market funds, high-yield savings accounts, short-term certificates of deposit, high-quality short-term bond funds and other super-safe investments.

5. Fending off inflation. Recent inflation has been a wakeup call for many retirees. But the truth is, even modest inflation can put a big dent in a retiree’s lifestyle after 15 or 20 years. What to do? As a hedge against higher costs in our late 70s and beyond, we might save some of the income we receive earlier in retirement.

But perhaps a better route would be to delay Social Security and purchase inflation-indexed Treasury bonds, both of which are designed to keep up with inflation. Retirees might also include a healthy allocation to stocks in their portfolio. While stocks come with no guarantees, a well-diversified portfolio should outpace inflation over the long haul, especially if we also have a cushion of cash that allows us to avoid selling during bad markets.

6. Protecting the long end. What if we outlive our savings? Just in case, we might want longevity insurance, in the form of income that’s guaranteed to last as long as we do. The most common form of longevity insurance is Social Security. Indeed, because Social Security also provides both inflation protection and reliable income, it’s one of the keys to a financially successful retirement—and I, for one, want as much of it as I can get, which is why I plan to delay benefits until age 70.

But Social Security isn’t the only form of longevity insurance. Many folks also have traditional employer pensions, and some have annuities that pay lifetime income, including both immediate-fixed annuities and deferred-income annuities. The more longevity insurance we have, the more risk we can take with our other money and the freer we can be in spending down our nest egg.

While I’m not a fan of long-term-care (LTC) insurance, it can also be viewed as financial protection for our later years. If folks have an LTC policy and hence they know they can at least partially cover such costs, that can free them up to spend more of their nest egg early in retirement.

7. When all else fails. The tighter our retirement finances, the more we need to ponder this issue. How will we cope if our retirement savings start dwindling and we’re faced with expenses we simply can’t cover. This is where our retirement’s financial backstop comes in. We might have to spend home equity, perhaps using a reverse mortgage. We might need to dip into the money we’d hoped to leave to the kids. We could have to cash in that old whole-life insurance policy we’ve been hanging on to.

None of these options is especially palatable. But as with the discretionary spending cuts we might make if we got hit with a financial emergency or a bad stock market, it’s worth pondering what our retirement’s financial backstop is, so we’re prepared if that time ever comes.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney, on Facebook and on Threads, and check out his earlier articles.

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Youth May Triumph

LET ME PLAY THE contrarian. A dominant narrative today is that—compared to earlier generations—younger workers are both economically disadvantaged and less inclined to do anything about it.

Such notions have been bandied about for at least 2,000 years. Horace wrote that “the beardless youth… does not foresee what is useful, squandering his money.” For a more modern take, check out these comments from HumbleDollar contributors and readers lamenting the financial plight of today’s younger generation:

Company "loyalty to employees in large measure no longer exists.”
“Young people are forced to contend with the twin challenges of relatively low salaries and high student loan burdens.”
Baby boomers are “fortunate in a way that’s nearly impossible for Americans today.”
“Many workers are strapped today, paying student debt, higher rents and everything else.”
“Each generation has been criticized by the prior generation as lazy, entitled, selfish or shallow.”
“I think [saving is] going to be more difficult for most people than it was even 30 years ago.”  

The supposed disadvantages faced by younger workers make for a lengthy list. Unlike previous generations, it’s said that young adults are contending with the demise of traditional pension plans, less employer loyalty to employees, higher college costs, ruinous student loans, renewed inflation, unaffordable home prices, higher mortgage rates, soaring rents, exorbitant health insurance premiums, steep medical costs, low wages, a dwindling Social Security trust fund, and new technologies that threaten jobs.

Got all that?

Yes, young workers are confronted by many challenges. But this gloomy scenario may be overdone, and there are many offsetting factors. Indeed, the young may yet outshine the baby boomers if they take advantage of everything our economy has to offer. Here are just 10 factors that tilt the odds in favor of young adults:

1. Today’s self-funded retirement savings plans, such as 401(k)s and IRAs, are completely portable. Workers can change companies to seize better opportunities, while taking their retirement savings with them.

By contrast, defined benefit pension plans typically locked workers into companies for decades, effectively handcuffing employees in place. Job changers can significantly add to their lifetime income by pursuing better opportunities. For instance, both my children changed jobs and boosted their income by 30% in their immediate post-college years, with no impact on their retirement savings.

Even with the decline of pension coverage, millennials—those born between 1981 and 1996—and the Gen Zers who followed are already on track for higher retirement savings than the baby boomers, according to Fortune and The Wall Street Journal.

2. Federal income tax rates are the lowest they’ve been in decades, meaning workers keep more of what they earn, making it easier for them to save for retirement and other financial goals.

3. Today’s workers benefit from the economic growth provided by new technology. One big advantage is the growing ability to work from anywhere. About 40% of American workers are now in remote or hybrid roles. More flexible work situations have also fueled the growth of the gig economy.

Technology has reduced wasteful commuting, improved business efficiency, made it easier to communicate, lowered the cost of financial services, provided infinite information access, made it easier to identify job opportunities and allowed us to perform tasks almost instantly—all for under $1,000 for a phone or laptop.

By comparison, many of today’s retirees started their careers pushing pencils and paper, solving math problems longhand, sending communications by snail mail, using carbon paper for copies and manipulating a slide rule for calculations.

4. Thanks to Roth accounts, young workers have the chance to earn tax-free earnings for perhaps seven decades. Roth IRAs, Roth 401k(s) and Roth conversions have only become available within the past quarter century. Despite their recent arrival, nearly a quarter of U.S. households already have a Roth account.

Our children funded their Roths from their minimal teen wages. By their early 20s, they’d accumulated balances approaching $30,000 apiece. They now proselytize the Roth’s benefits to their friends.    

5. Our children are also funding health savings accounts (HSAs), which were unavailable to their parents. HSAs began 19 years ago, with most accounts opened within the past 10 years. Roth and HSAs provide today’s workers with antidotes to the tax-bracket creep that accompanied earlier generations' upward career earnings.

HSAs are the only savings vehicle providing the triple advantage of tax-deductible contributions, tax-deferred growth and tax-free withdrawals. Many account holders plan to postpone withdrawals until retirement, meaning a long runway of tax-favored growth lies ahead.

6. Today’s workers have the added advantage of extremely low-cost or even free investing options. No prior generation could earn compound returns without the drag of fees and taxes.

7. Widely documented trends indicate that younger generations are buying smaller homes and packing them with less stuff. While lower incomes may partially contribute to these trends, young adults also exhibit greater environmental concerns and a reduced collector mentality. They favor experiences and fast wi-fi over McMansions filled with consumer goods.

8. Despite naysayers, most long-term U.S. economic trends are in youth’s favor. The standard of living, as measured by GDP per capita, has risen over time. The prevalence of poverty and the ranks of the medically uninsured continue to decline.

At the same time, the percentage of households owning stock has doubled over the past four decades and is approaching 60%. Education attainment has increased markedly. Over the past six decades, the percentage of Americans graduating from high school has surged from 50% to 91%, and college graduates have nearly quadrupled from 10% to 38%.

9. The financial ace-in-the-hole for younger generations is the coming $70 trillion transfer of inherited wealth. While the wealth concentration held by elders is often lamented, their children and grandchildren will soon inherit these dollars.

Neither my parents nor my in-laws were wealthy, but two small inheritances from them raised our financial comfort level, allowing us to increase our retirement spending and maintain a higher stock allocation.

10. The government safety net is more robust. Obamacare alone has a record 40 million participants. Medicaid and the Children’s Health Insurance Program have enrolled 85 million. Another 23 million taxpayers took advantage of the earned income tax credit in 2023, and 41 million people received SNAP food stamp benefits.

Total entitlement spending, including Social Security, is a bit over 50% of the federal budget. This is not meant to spark a debate about whether government support is ideal, which it probably isn’t. Still, these federal programs benefit a large swath of the U.S. population, including many HumbleDollar readers.

Just as our parents often looked askance at our behavior, we baby boomers may not fully endorse the choices made by the next generation. But guess what? To succeed, they may not need to follow their parents’ financial playbook—and, indeed, they probably shouldn’t. Don’t count them out. I’m not.

John Yeigh is an author, coach and youth sports advocate. His book “Win the Youth Sports Game” was published in 2021. John retired in 2017 from the oil industry, where he negotiated financial details for multi-billion-dollar international projects. Check out his earlier articles.

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A Healthy Sum

AS A KID, I WAS usually one of the last chosen for pickup games, be it softball, basketball or football. My athletic prowess was limited to being the fastest kid in my neighborhood, but it seems I lived in a slow neighborhood. I had moderate success on a local swim team, but again found that success didn’t translate to surrounding communities.

Into my teen years, I was plagued by allergies and asthma. It wasn't until the late 1970s, when I was in my early 20s and still in college, that I took ownership of my health and started running. At the time, running was virtually free. Everyone had a pair of tennis or basketball shoes. It didn’t take long before I entered local 5K and 10K races. For $5 or so, I could run in a race and get a race T-shirt, along with all the snacks you could scarf down afterwards.

I was never racing to win, but I was always racing against myself, trying to improve. Soon it required new and better running shoes, lightweight shorts and singlets, and more training time. To track my progress, I kept a running log, painstakingly scribbled into a notebook.

I discovered that the more I ran, the more often I had to replace my running shoes. I ran a lot of races, eventually completing a marathon in a respectable time. This continued into the 1980s, but things changed when my first wife and I started a family and bought a house requiring a lot of work.

In the early 1990s, I went on my first adult backpacking trip to the Tetons. It was amazing—but I needed gear for the trip. A backpack, sleeping bag and pad, tent, clothing and cooking gear were all required. During that time, I also participated in several sprint triathlons, typically involving a half-mile swim, 13-mile bike ride and three-and-a-half-mile run. I borrowed someone’s road bike for the first one, but the next year I had my own bike, though it was a junky hybrid, not a proper road bicycle.

As we moved into the early 2000s, life got even busier. I had a new and exciting job, my wife was traveling a lot for her job, and the boys were turning into teenagers. My best opportunities for alone time were running and biking, but were limited by family commitments. We lived in an area with easily accessible greenways that led to trails in a nearby state park. My mountain bike time increased, as my right knee was now objecting to running so often.

Also, in the 2000s, I became an adult leader of a Boy Scout troop. We generally camped one weekend per month during the school year and spent a week at summer camp. I was an adult leader for 12 years, including a Scoutmaster for three of those years.

In 2005, I took some of the troop on a high adventure backpacking trip to Philmont Scout Ranch in New Mexico. In 2006, we backpacked in the White River area of Colorado and, in 2008, we backpacked the Wind River Range in Wyoming. One or both of my sons usually attended these outings. This period also coincided with the departure of my wife. That’s when I started rock climbing. As you might imagine, all these activities required training, plus an investment in gear, travel and preparation. Fortunately, I had a very understanding employer.

A bike wreck pretty much ended my running activities in 2007. I had already developed osteoarthritis in my right knee, plus most of the cartilage was also gone. I continued biking, hiking, backpacking and climbing. Have I mentioned whitewater rafting? Some of my Scout leader friends and I began annual trips to West Virginia for guided tours on the Gauley River during Class V water season. This was not a passive activity. Paddling for 26-plus miles, often in fast and violent rapids, is a lot of work.

At the request of my girlfriend, now wife, I gave up the rock climbing around 2009, but I replaced that with a YMCA membership for workouts on cold or wet days, when I didn’t ride outdoors. I turned 70 last year and went on my last super-aggressive whitewater rafting trip.

I’m considering the purchase of a second bike. We live six miles from the local state park, and I often bike to and inside the park on the designated trails. But I wish I had a gravel bike that’s nimbler and lighter. Bikes got expensive during the pandemic, and I don’t think the prices have come down. I’ve not yet pulled the trigger, but I think I’ve found what I want.

So, where’s the payoff? I have no idea how much I’ve spent over the years on bikes, bike maintenance and repairs, shoes, hiking boots, gear, travel, gym memberships and trips, not to mention the occasional doctor and physical therapy bill. But the amount of satisfaction I’ve gained in return is immense. My weight has been stable for well over 20 years. I still do all the yardwork, gardening and occasional home projects.

My smartwatch has a “fitness age” feature that says my activity level is more representative of someone age 61 and gives pointers for lowering that to 59½. I’m not sure I’m that compulsive, but we’ll see. At this juncture, I’ve given up running, climbing and aggressive whitewater rafting. Still, there are days when I probably overdo it.

I’m aware that, as time goes by, I’ll need to take other things off my activity list. Those will be day-by-day calls, based on how I feel, input from my wife and family, physical condition, and other currently unknown circumstances. But today, as soon as the greenways and trails dry out, I’m headed out for a ride.

Jeff Bond moved to Raleigh in 1971 to attend North Carolina State University and never left. He retired in 2020 after 43 years in various engineering roles. Jeff’s the proud father of two sons and, in 2013, expanded his family with a new wife and two stepdaughters. Today, he’s “Grandpa” three times over. In retirement, Jeff works on home projects, volunteers, reads, gardens, and rides his bike or goes to the gym almost every day. His previous articles were Unsettling Experience and They Pitched We Swung.

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Gardeners Needed

"SOME PEOPLE automatically sell the ‘winners’—stocks that go up—and hold on to their ‘losers’—stocks that go down—which is about as sensible as pulling out the flowers and watering the weeds," argued Peter Lynch in his 1989 book One Up on Wall Street.

My father worked for Sears for 30 years, delivering washers, freezers and other appliances. Sears rewarded employees with stock, even delivery men like my dad. Over time, through splits and spin-offs, he acquired shares of Allstate, Discover, Dean Witter and Morgan Stanley. These shares supported my parents through their retirement and became my inheritance.

My father passed away in 2008, leaving me and my siblings shares in everything that was Sears. This was my first exposure to stocks and the financial markets. At age 53, I was oblivious to investment matters. My life was working for a nonprofit youth organization. Stocks and investing simply weren’t part of my world.

Spurred on by the fear of having almost nothing for retirement, I started studying investing. As part of this learning process, I often talked to others to see what they knew. Most were just as ignorant. Sadly, five of my colleagues—who had also inherited some wealth—had the misfortune of meeting and trusting unscrupulous financial advisors. These slick advisors kindly proceeded to help my friends lose their inheritance.

Based on these sad stories, I was determined to avoid a similar fate. I embarked on a journey to study and learn about investing, declaring to myself, "I might lose, but I won't let anyone steal from me."

Initially, my hubris exceeded my knowledge. I read about value investing. It seemed like a good idea and, with the best of intentions, I bought some undervalued companies. What could possibly go wrong? That’s when I learned the hard way about catching falling knives.

“No problem,” I thought, “how much lower can the price go? It must be at its bottom.” Oh my, I found out. Ouch.

But as for my inherited Sears shares, could there be a more stable company? I read some place that someone said that their favorite holding period is forever.

Established in 1893, Sears grew, becoming a household name across generations. Its expansive catalog offered everything from cutlery to complete home kits. In 1997, reaching its pinnacle, Sears held the 15th position in the S&P 500.

In 2018, just 21 years later, Sears declared bankruptcy. During the company’s years of decline, the S&P 500 thrived. Between 1997 and 2018, the S&P 500-index climbed from around 970 to 2500, an impressive increase of roughly 160%, excluding dividends.

At the start of that 21-year stretch, Amazon entered the S&P 500 in 300th place. By 2018, it was in fourth place. Among the top 10 companies in 2000, only one of them—Microsoft—is still there in 2024.

Looking into the shiniest crystal ball, we can’t know what the top 10 companies will be two decades from now, but don’t worry. The good news: We can buy the top companies of the future if we buy an S&P 500-index fund today.

Why is it that, during the years that Sears inched its way to bankruptcy, the S&P 500 marched to a 160% gain? Many would say diversification. But maybe we should add another factor.

The S&P 500 index is in a continual process of rebalancing based on market capitalization. As one company fades, another emerges. The index automatically lightens up on its losers, while automatically investing more in the winners. It automatically performs the function that too many of us don’t have the nerve to do on our own—and that’s to pull the weeds and water the flowers.

William Housley lives in Parker, Colorado, and has worked with Youth for Christ for more than 47 years. There, he serves as a trustee on the 403(b) committee. In their work with Youth for Christ, Bill and his wife Gretchen, a registered nurse, have ministered to youth in California, Germany, Vermont and Colorado. Today, Bill continues to contribute to the organization as “legacy staff.” He and his wife love spending time with their three grandsons.

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Our Good Fortune

HOW DO WE MEASURE societal wealth? And what triggered this thought?

I started pondering the issue early last year. I had a total left knee joint replacement in January 2023. Not long after, I was sitting in my living room with an ice pack on my knee, having just completed a strenuous set of stretches and exercises.

The room was being warmed by a modern gas fireplace, lit by a remote control. No wood to split, no kindling to gather, no smoke to worry about. It was leading up to St. Patrick’s Day, so I was listening to a specially curated playlist of Irish music on a smart device. There was no need to get up and flip the album or change the tape.

I was sitting in a motorized leather recliner with multiple controls and a USB charging port. This came in handy during my recovery, as I needed to elevate my knee to reduce the swelling.

On the wall was a 10-year-old, 55-inch flat panel TV. This is ancient technology today, but it still worked quite well. Instead of watching TV, I was reading on my laptop. If I needed groceries, books, clothing, wine or other essentials, I could have ordered them on my laptop and had the items delivered to my doorstep.

Perhaps the most remarkable advance was buried in my knee. I went to a modern outpatient surgery center in Egg Harbor, New Jersey. The staff was friendly, professional and efficient. I entered at 9:30 a.m. and was on my way home by 4 p.m. In between, I acquired a new Stryker Triathlon Total Knee System with a 25-year life span. That will get me to age 90, at which point I assume they’ll be able to replace the plastic pad as easily as a mechanic replaces the pads on my car’s disc brakes.

Four years ago, I had the same surgery on my right knee. I spent one night in the hospital. I had physical therapy at my home for about two weeks, and then went to a local physical therapy facility for another four weeks. Physical therapy was tough, but it worked. This time around, I went to physical therapy two days after surgery. It was still hard work, but I was significantly ahead of the previous schedule.

The advances in medical technology that are available today would have been unthinkable not long ago. Knee, hip and shoulder replacements have become commonplace. My latest knee replacement was largely covered by Medicare, and only cost me the $226 Part B deductible.

I’ve had conversations about this topic with a friend who’s one of the more financially savvy people I know. He’s often commented about the spectacular amount of wealth we share. It’s easy to focus on our society’s challenges and failures. It would be folly to dispute that they exist. But I think it’s worth taking a step back and thinking about the spectacular wealth available to us. I don’t include it when I calculate our family’s net worth, but it would swamp anything we’ve acquired.

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Delayed Reaction

IF YOU’VE READ MY articles, you know I don’t respond to readers’ comments very often. It’s not because I’m quiet or shy. Rather, it’s because I like to be thoughtful in my responses, rather than firing off a quick one- or two-sentence answer in the comments section.

That brings me to four comments that I’ve found myself pondering, often months or even years after the article appeared. Here’s my belated response to each.

Trading up. I wrote an article where I mentioned that we own a 2007 Honda Fit. One reader thought we should get a newer car, so we have the latest safety technology to protect us from aggressive drivers. “If not for yourself, get a newer car to protect your wife,” the commenter said.

When we start taking some cross-country road trips, we’d like to buy a newer car with the latest safety features. In fact, our current budget calls for us to purchase a new vehicle this year. But I don’t think that’s going to happen because the Honda Fit is running well, and we don’t drive it very much.

Indeed, last year, the car was driven just 545 miles. It’s well maintained and it’s only used for running errands, so we never take it very far from the house. Still, there will be a time when we’ll need another car, and one with the latest safety technology would be a good idea.

Maybe the biggest reason I’m putting off buying a newer car is because I’ve had two cars stolen. They were both found, but one had been set on fire and the other was missing most of its parts.

The more traumatic theft happened in the early 1970s, when I was 20 years old. I’d bought a Volkswagen Super Beetle and had it for just six months when it was stolen while I was busy attending college classes. For months afterward, I’d panic and my heart would start pounding if I didn’t immediately see my car in the parking lot.

I still haven’t completely gotten over the loss of the two stolen cars. Last year, I was at Lowe’s. I couldn’t find our Honda Civic, which is our other car. The first thing I thought was, “It’s been stolen.” I called my wife and told her what had happened. I got her all upset.

I wandered around the parking lot, pressing the emergency button on the remote. I finally saw the flashing lights and I could faintly hear my car’s horn in the distance. I can’t imagine how I would have reacted if it was a newer, more expensive car.

Home help. A reader, who saw one of my articles when it was posted on MarketWatch, wanted to know how much money we had. The short answer: We have enough. My wife and I both lived frugally before we got married. When we married and merged our finances, we became even more financially secure.

Still, we can’t ignore the fact that we’ve received some help along the way. We inherited our current home from my parents. My sister, who lives in Tennessee, didn’t want the house. She was more than happy to take other assets. It’s easy to settle an estate when you have two siblings who feel they already have enough.

The house we inherited in 2019 was appraised for $750,000. Today, Zillow’s estimate is $1.3 million. Inheriting the house made a big difference in our life. No, the current price doesn’t change our lifestyle because we have no intention of selling. Rather, I wish my parents were still alive, so they could see how much Rachel and I enjoy living in the home they bought in 1978 for $86,000.

Left alone. One gentleman commented on one of my articles that he’d lost his wife when he was 72 years old, my current age. I was lost for words when I read that comment because that’s one of my greatest fears.

My mother struggled with my father’s death. After he died, she put away all his photos and wanted all his clothes removed from the closet right away. She thought if she hid everything that reminded her of him, some of the pain might go away. That, of course, didn’t work.

When I started spending more time with my mother, she'd sometimes call me Sam, my father’s name. I took her to see a couple of therapists. One sold her his book, and mostly talked about himself. She even tried attending church again. But the only thing that really seemed to help her was what the reader said helped him—which is the support of family and friends.

Aging in place. Some readers question the viability of our plan to stay in our home for as long as we can. Some thought we should consider a continuing care retirement community.

As I mentioned in a previous article, I believe we have enough money to pay for the care we might need if we stay in our home. But as I watch what’s currently happening with my neighbor Sue, I’m also aware that aging in place might not be feasible.

Sue is 94 years old and lives alone. Her daughter comes over often to take her out to lunch, but Sue is pretty much on her own. One day, I saw her daughter drive off with some of Sue’s belongings. I haven’t seen Sue since.

I can see Sue’s living room from our bedroom window. At night, before I go to bed, I look out the window. I used to see her television and a light on. Sue likes to stay up late watching movies. The past three weeks, her house has been dark.

When I crawl into bed at night, Rachel asks me whether Sue is home. We’re both anxious for her return. From our bedroom window, we can see the threat that Sue’s currently fighting—and we know it could also await us.

Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor's degree in history and an MBA. A self-described "humble investor," he likes reading historical novels and about personal finance. Check out his earlier articles and follow him on X @DMFrie.

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