I can particularly relate to your second point, Jonathan - and even worked at the same financial institution to which you refer, only nearly three times longer, which was quite long enough, thank you. Dysfunctionality and bureaucracy, a perennial hallmark, mushroomed exponentially after the mega-merger of the commercial and investment bank, and posed a constant challenge. Still, that nexus allowed me to set foot in both worlds, with double the possibility for personal growth. But ALL of that pales to having been posted, very early on in my career, for just a couple of years, to its Brazil operations. I fell in love with the country's culture, and its people, and vowed to eventually return. When a bit later, that corporate relocation was not going to happen, I found the perfect excuse to make a clean exit and realize that objective on my own terms, where I remain today. And that is what made, not only that particular career choice, but my life in general, make sense.
Jonathan, given all the generosity you have shown us in sharing your wisdom through the years, may you give yourself all the space you need, both for your personal care, and yes, for traveling/exploring with Elaine.
This long-time reader in Brazil can only thank you for your humanity and generosity in sharing your wisdom. I send tropical and positive energy your way as you continue to inspire us.
I recall clipping an article of Jonathan's in the WSJ, circa 2001, entitled something along the lines of "The Roth Triumphs Over the Long Run." I continued to run the numbers over the years but delayed taking the plunge until 2010 when I finally made a mega-conversion of my entire Rollover IRA. In that year, Congress - for once - presented a seemingly irrestible opportunity: convert in 2010, pay nothing in conversion taxes in that year, and spread equally the tax liability over the 2011 and 2012 tax years. Wow. One of the best financial decisions I have ever made (the tax-free growth has eclipsed the actual tax payments). So I hope Jonathan you will accept my [outrageously belated but nonetheless sincere] thanks.
The "default" option of many investors of putting foreign funds inside a taxable account solely in order to receive a foreign tax credit may not be in their best interest. You would be better off tax-wise by having them inside an IRA wrapper if your US tax savings by having the fund inside the wrapper outweighs the foreign tax you would otherwise have credited to you without it. One key metric to look at in your foreign funds is the differential between the in-country withholding tax rate on that foreign source income that the fund is subjected to vs. your personal tax rate. For this reason, aside from the simplicity cited in the article, I have included foreign funds inside a Roth,
A key metric to look at with one's foreign funds is the differential between the in-country withholding tax rate on that foreign source income that the fund is subjected to vs. your personal tax rate. If your US tax savings by having the fund inside the IRA wrapper outweighs the foreign tax you would otherwise have credited to you without it, then you would generally be better off tax-wise by having it inside a wrapper. For this reason I have, like yourself, included foreign funds inside a Roth for a number of years.
These are all critical decisions indeed, but there is definitely no 'one size fits all' paradigm. Over the years I have followed most of the bogleheads and humble dollar tenets religiously - but not all, including some of the decisions listed here, where I might be considered guilty of heresy - but always through careful consideration of personal circumstances, and it has worked out better than imagined. In my case I worked at an early age through graduate school, in a relatively high-income field, stateside and overseas (where major expenses were covered and taxes grossed up), lived simply, saved practically everything, maxed out the 401K, received the match, and invested the rest in index funds as well as in real estate. Without knowing any better I was probably an early adherent to the FIRE movement, long, long before it became fashionable - and unfashionable - as I ended up quitting the work force at age 40 two decades ago. This was due to a combination of both job burnout and a desire to shorten the distance in an overseas long-distance relationship. I sold all the stateside real estate and physical possessions - except the financial investments - and moved to a lower-cost country in Latin America, where I live to this day just over two decades later. During this time I have lived modestly but comfortably, confining most travel to exploring my and nearby countries in the region. Absolutely key was the relatively low cost of local health care (of acceptable quality). This year, at age 62, I claimed Social Security, and while certainly modest by site standards, it is more than enough to fund now overseas travel and leisure, with investment income continuing to cover fixed expenses. After a two-decade hiatus in seeing such regular payments (aside from fixed income coupons) it feels almost like a second retirement. As Jonathan has far more eloquently stated here, two of the most important elements to making it financially are saving prodigiously and living within one's means. So hopefully I will not be considered here a total heretic and banished from the forum (LOL).
Interesting discussion. Most folks here appear to be using Social Security to cover fixed and if sufficient variable expenses - with portfolio income covering leisure/travel. I am doing the precise inverse. That is, utilizing recurring portfolio income (while letting the equity portion grow) to cover all expenses - with Social Security funding leisure/travel. Works for me.
Comments:
Many thanks MikeinLA for bringing this to HD readers' attention. It prompted me to, quite literally, triple dip, by also tuning into, one after the other, to Jonathan's other interviews on the Long View. I have no doubt that fellow HD readers will also find this extremely worthwhile. Links follow. “Jonathan Clements: ‘It’s in Wall Street’s Interest to Make Everyday Investors Think That They Are Stupid,’” The Long View podcast, Morningstar.com, July 31, 2019. “Jonathan Clements: ‘Humility Is a Hallmark of People Who Are Financially Successful,’” The Long View podcast, Morningstar.com, Dec. 26, 2023.
Post: Death Benefits
Link to comment from October 20, 2024
I can particularly relate to your second point, Jonathan - and even worked at the same financial institution to which you refer, only nearly three times longer, which was quite long enough, thank you. Dysfunctionality and bureaucracy, a perennial hallmark, mushroomed exponentially after the mega-merger of the commercial and investment bank, and posed a constant challenge. Still, that nexus allowed me to set foot in both worlds, with double the possibility for personal growth. But ALL of that pales to having been posted, very early on in my career, for just a couple of years, to its Brazil operations. I fell in love with the country's culture, and its people, and vowed to eventually return. When a bit later, that corporate relocation was not going to happen, I found the perfect excuse to make a clean exit and realize that objective on my own terms, where I remain today. And that is what made, not only that particular career choice, but my life in general, make sense.
Post: Never Quite Enough
Link to comment from September 21, 2024
Jonathan, given all the generosity you have shown us in sharing your wisdom through the years, may you give yourself all the space you need, both for your personal care, and yes, for traveling/exploring with Elaine.
Post: The C Word
Link to comment from June 16, 2024
This long-time reader in Brazil can only thank you for your humanity and generosity in sharing your wisdom. I send tropical and positive energy your way as you continue to inspire us.
Post: The C Word
Link to comment from June 15, 2024
I recall clipping an article of Jonathan's in the WSJ, circa 2001, entitled something along the lines of "The Roth Triumphs Over the Long Run." I continued to run the numbers over the years but delayed taking the plunge until 2010 when I finally made a mega-conversion of my entire Rollover IRA. In that year, Congress - for once - presented a seemingly irrestible opportunity: convert in 2010, pay nothing in conversion taxes in that year, and spread equally the tax liability over the 2011 and 2012 tax years. Wow. One of the best financial decisions I have ever made (the tax-free growth has eclipsed the actual tax payments). So I hope Jonathan you will accept my [outrageously belated but nonetheless sincere] thanks.
Post: Paying to Avoid Pain
Link to comment from May 11, 2024
The "default" option of many investors of putting foreign funds inside a taxable account solely in order to receive a foreign tax credit may not be in their best interest. You would be better off tax-wise by having them inside an IRA wrapper if your US tax savings by having the fund inside the wrapper outweighs the foreign tax you would otherwise have credited to you without it. One key metric to look at in your foreign funds is the differential between the in-country withholding tax rate on that foreign source income that the fund is subjected to vs. your personal tax rate. For this reason, aside from the simplicity cited in the article, I have included foreign funds inside a Roth,
Post: Not Scared of Bears
Link to comment from April 28, 2024
A key metric to look at with one's foreign funds is the differential between the in-country withholding tax rate on that foreign source income that the fund is subjected to vs. your personal tax rate. If your US tax savings by having the fund inside the IRA wrapper outweighs the foreign tax you would otherwise have credited to you without it, then you would generally be better off tax-wise by having it inside a wrapper. For this reason I have, like yourself, included foreign funds inside a Roth for a number of years.
Post: Totally Your Choice
Link to comment from April 21, 2024
These are all critical decisions indeed, but there is definitely no 'one size fits all' paradigm. Over the years I have followed most of the bogleheads and humble dollar tenets religiously - but not all, including some of the decisions listed here, where I might be considered guilty of heresy - but always through careful consideration of personal circumstances, and it has worked out better than imagined. In my case I worked at an early age through graduate school, in a relatively high-income field, stateside and overseas (where major expenses were covered and taxes grossed up), lived simply, saved practically everything, maxed out the 401K, received the match, and invested the rest in index funds as well as in real estate. Without knowing any better I was probably an early adherent to the FIRE movement, long, long before it became fashionable - and unfashionable - as I ended up quitting the work force at age 40 two decades ago. This was due to a combination of both job burnout and a desire to shorten the distance in an overseas long-distance relationship. I sold all the stateside real estate and physical possessions - except the financial investments - and moved to a lower-cost country in Latin America, where I live to this day just over two decades later. During this time I have lived modestly but comfortably, confining most travel to exploring my and nearby countries in the region. Absolutely key was the relatively low cost of local health care (of acceptable quality). This year, at age 62, I claimed Social Security, and while certainly modest by site standards, it is more than enough to fund now overseas travel and leisure, with investment income continuing to cover fixed expenses. After a two-decade hiatus in seeing such regular payments (aside from fixed income coupons) it feels almost like a second retirement. As Jonathan has far more eloquently stated here, two of the most important elements to making it financially are saving prodigiously and living within one's means. So hopefully I will not be considered here a total heretic and banished from the forum (LOL).
Post: Fully Committed
Link to comment from April 20, 2024
Interesting discussion. Most folks here appear to be using Social Security to cover fixed and if sufficient variable expenses - with portfolio income covering leisure/travel. I am doing the precise inverse. That is, utilizing recurring portfolio income (while letting the equity portion grow) to cover all expenses - with Social Security funding leisure/travel. Works for me.
Post: Where It Goes
Link to comment from April 14, 2024
Happened to re-watch this film two days ago. An apt analogy. Even more so for the extreme market volatility of the EM country where I reside.
Post: How It Happens
Link to comment from February 23, 2022