I struggle with this every year. One hypothetical: If I have 200K in my IRA and convert it to a Roth, and I pay 22%, not only have I given 44K to Uncle Sam, my total nest egg is smaller and so I need higher returns to offset not only the tax, but the difference in the earning power of the total old and total post- conversion nest eggs. Avoiding tax on the Roth IRA growth won't itself be enough to allow the new nest egg to catch the old arrangement, even if it is growing tax free, because the comparative gains in the new total nest egg each year are smaller than they might otherwise have been in the pre-conversion nest egg. You need to earn a lot more on your 156K to catch up to the post-tax earnings on the 200K, I think. It might then be better to pay the taxes later, at the last possible moment, after your 200K has earned a lot for you. Never an easy comparison.
I recall Jonathan was a big believer in worldwide diversification. It was one area where I disagreed with him, not because of the diversification theory, but because of political and financial realities. A few things you mention fit that view. My view is based on three things. First, I do believe the US is still unique and will remain so for my lifetime at least. Second, I also believe that most countries lack the discipline and legal structures that encourage free enterprise, and the politicians there either slow progress by private companies or extort some of their value. Third, the rest of the world is not one market. It is hundreds of individual country markets that are often governed by facts that we in the US can't always understand, or can't address in a timely way to protect investors. It is hard enough to try to do that for the US market. I'm not saying Jonathan was wrong. International performance went strongly his way in the last few years of his life. I just don't feel comfortable with my money there.
Two quick comments about public company calls (and reporting). First, the companies' reports and the calls about them are the 'best' that they can legally say. The reports are required by law, and ethical companies don't want to overstate or misstate anything important. At the same time, they don't want to understate their performance. That could hurt their share price. By definition, there are rarely upside surprises that can be promised or expected in advance, but the structure leaves lots of room for downside future surprises. Second, companies make lots of room for key words, i.e., words that are in vogue. Now it is AI, and affordability. It used to be equity, climate neutrality and inclusiveness. Next year, there will be new such words. One should usually read them as window dressing.
I second the recommendation always to be curious. A curious mind exercises itself, selects things for which one already has an instinctive interest, and offers new neural pathways to connect new facts and figures to those that already reside between your ears. Curiosity will also make you more confident... and happier. Don't settle for old stuff alone. It is nice to watch movies and read books that are old chestnuts. Just don't stop there.
I choose donees based on one or more of three criteria: an essential objective I support, efficient use of donations for the donee's purpose (low solicitation and administrative expense), and a personal charity to whom I am personally connected and thankful. I went to a Catholic high school and am particularly thankful to it. But I also believe religious charities of many different faiths tend to be most efficient in how they deliver goods and services to the needy. I also like public libraries. For a while, I clustered bigger donations to maximize itemized Schedule A deduction value. The deduction laws have now changed, and using the deduction path is less valuable. But I have pretty big RMDs for my IRA and SEP. So I now use the QCD route to donate some pretty large sums. It is easy, and every dollar totally eliminates your Federal tax on that dollar, though maybe not state tax. (Setting up a charitable trust or donor advised fund is not for me. I like my donee and the exact donation amount to be connected at the time the money leaves my pocket.) I revisit this every year, to make sure I keep up with the law.
The structure of one's "wealth" greatly influences its real value. Having $1 million in illiquid or volatile interests would seem to be less valuable than $1 million in investments that don't fluctuate wildly and that can be tapped easily. I also noticed in the comments that few people differentiate between "wealth" that is still subject to income or capital gains taxes (or both), and "wealth" that is not subject to further taxes in order to be accessed. Again, $1 million in CDs in a regular brokerage account is probably a lot more immediately valuable than $1 million in a stock mutual fund in one's IRA that has greatly appreciated over the years but with capital gains that have never been taxed. The former may be subject to some income tax, but probably not too much. The latter will still be subject to some income taxes, but more importantly, significant capital gains taxes when tapped for use - and at one's highest marginal tax rates. So, the smart investor's "wealth" spreadsheet may list the investment at current market value, but it should also be shown at its most likely "after-tax" value as well. IMHO, "wealth" should always be calculated at that most-likely after-tax level, based on what it would be today if one needed it all now and had to liquidate. Brag about the former, but look in the mirror and tell the truth with the latter.
These are always math questions - about fees, risk, varying returns, taxes and life expectancies - among other things. Is it worth it to pay a significant fee up front for a guaranteed income stream, or is it better to put the money into an investment that might deliver a better return and cost less to purchase? One can build an Excel spreadsheet, but only you can fill the cells with your assumptions. Start out by seeking your best case, worst case and most likely case, and spend a lot of time considering each cell entry. And, as they say, your mileage may vary.
It took me a few years to accept LEDs. They were expensive and their claims to longevity were, IMHO (and experience), blatantly untrue. A few were incompatible with certain wiring configurations and lamps. I stocked up on some incandescents to weather the ban. But then the LEDs got better, the choices among light shades got much better (daylight, cool white etc), and now many can be selected on the bulb. New electronics offered "on at dusk, off at dawn" and motion sensors. Even the prices got better. So I've now been completely converted. Every new replacement is now an LED. And I think I have a few incandescent spares I will never use.
That fourth point is the one that can have a positive effect and that we fail to appreciate. While inflation keeps taking a bite out of what we have, we fail to recognize that over the years, what we get for our money for a high percentage of our purchases usually keeps getting better. TVs are electronic miracles. Same with telephones. Same with hearing aids. Same with cars. Same with power tools and lawnmowers. Etc. Etc. One can point to lots of things that have been cheapened - clothing quality, some appliances, and the like - but on balance what we own now would wow our parents and grandparents.
I agree with you. That's the reason I have my home completely termite-proofed again after about eight or ten years. I tell the guy to treat it like it was never treated, and to make sure he gets every nook and cranny. My parents bought a house that had had a little termite damage in the early 1960s, and it had been completely remediated, But when we sold the house in an estate sale more than 50 years later, the buyer still wanted assurances that there were no more termites. So, I don't want the "tails" to follow of any similar event
Comments
I struggle with this every year. One hypothetical: If I have 200K in my IRA and convert it to a Roth, and I pay 22%, not only have I given 44K to Uncle Sam, my total nest egg is smaller and so I need higher returns to offset not only the tax, but the difference in the earning power of the total old and total post- conversion nest eggs. Avoiding tax on the Roth IRA growth won't itself be enough to allow the new nest egg to catch the old arrangement, even if it is growing tax free, because the comparative gains in the new total nest egg each year are smaller than they might otherwise have been in the pre-conversion nest egg. You need to earn a lot more on your 156K to catch up to the post-tax earnings on the 200K, I think. It might then be better to pay the taxes later, at the last possible moment, after your 200K has earned a lot for you. Never an easy comparison.
Post: Roth Conversions
Link to comment from November 9, 2026
I recall Jonathan was a big believer in worldwide diversification. It was one area where I disagreed with him, not because of the diversification theory, but because of political and financial realities. A few things you mention fit that view. My view is based on three things. First, I do believe the US is still unique and will remain so for my lifetime at least. Second, I also believe that most countries lack the discipline and legal structures that encourage free enterprise, and the politicians there either slow progress by private companies or extort some of their value. Third, the rest of the world is not one market. It is hundreds of individual country markets that are often governed by facts that we in the US can't always understand, or can't address in a timely way to protect investors. It is hard enough to try to do that for the US market. I'm not saying Jonathan was wrong. International performance went strongly his way in the last few years of his life. I just don't feel comfortable with my money there.
Post: Do I really need International funds in my portfolio? I say no.
Link to comment from November 1, 2026
Two quick comments about public company calls (and reporting). First, the companies' reports and the calls about them are the 'best' that they can legally say. The reports are required by law, and ethical companies don't want to overstate or misstate anything important. At the same time, they don't want to understate their performance. That could hurt their share price. By definition, there are rarely upside surprises that can be promised or expected in advance, but the structure leaves lots of room for downside future surprises. Second, companies make lots of room for key words, i.e., words that are in vogue. Now it is AI, and affordability. It used to be equity, climate neutrality and inclusiveness. Next year, there will be new such words. One should usually read them as window dressing.
Post: Executives have stopped talking about recession. They talk about affordability instead.
Link to comment from November 1, 2026
I second the recommendation always to be curious. A curious mind exercises itself, selects things for which one already has an instinctive interest, and offers new neural pathways to connect new facts and figures to those that already reside between your ears. Curiosity will also make you more confident... and happier. Don't settle for old stuff alone. It is nice to watch movies and read books that are old chestnuts. Just don't stop there.
Post: Brain Power
Link to comment from November 1, 2026
I choose donees based on one or more of three criteria: an essential objective I support, efficient use of donations for the donee's purpose (low solicitation and administrative expense), and a personal charity to whom I am personally connected and thankful. I went to a Catholic high school and am particularly thankful to it. But I also believe religious charities of many different faiths tend to be most efficient in how they deliver goods and services to the needy. I also like public libraries. For a while, I clustered bigger donations to maximize itemized Schedule A deduction value. The deduction laws have now changed, and using the deduction path is less valuable. But I have pretty big RMDs for my IRA and SEP. So I now use the QCD route to donate some pretty large sums. It is easy, and every dollar totally eliminates your Federal tax on that dollar, though maybe not state tax. (Setting up a charitable trust or donor advised fund is not for me. I like my donee and the exact donation amount to be connected at the time the money leaves my pocket.) I revisit this every year, to make sure I keep up with the law.
Post: Jonathan Clements Initiative at the Bogle Center for Financial Literacy
Link to comment from October 24, 2026
The structure of one's "wealth" greatly influences its real value. Having $1 million in illiquid or volatile interests would seem to be less valuable than $1 million in investments that don't fluctuate wildly and that can be tapped easily. I also noticed in the comments that few people differentiate between "wealth" that is still subject to income or capital gains taxes (or both), and "wealth" that is not subject to further taxes in order to be accessed. Again, $1 million in CDs in a regular brokerage account is probably a lot more immediately valuable than $1 million in a stock mutual fund in one's IRA that has greatly appreciated over the years but with capital gains that have never been taxed. The former may be subject to some income tax, but probably not too much. The latter will still be subject to some income taxes, but more importantly, significant capital gains taxes when tapped for use - and at one's highest marginal tax rates. So, the smart investor's "wealth" spreadsheet may list the investment at current market value, but it should also be shown at its most likely "after-tax" value as well. IMHO, "wealth" should always be calculated at that most-likely after-tax level, based on what it would be today if one needed it all now and had to liquidate. Brag about the former, but look in the mirror and tell the truth with the latter.
Post: Rich or Wealthy?
Link to comment from October 11, 2026
These are always math questions - about fees, risk, varying returns, taxes and life expectancies - among other things. Is it worth it to pay a significant fee up front for a guaranteed income stream, or is it better to put the money into an investment that might deliver a better return and cost less to purchase? One can build an Excel spreadsheet, but only you can fill the cells with your assumptions. Start out by seeking your best case, worst case and most likely case, and spend a lot of time considering each cell entry. And, as they say, your mileage may vary.
Post: Is now the time for an annuity?
Link to comment from October 4, 2026
It took me a few years to accept LEDs. They were expensive and their claims to longevity were, IMHO (and experience), blatantly untrue. A few were incompatible with certain wiring configurations and lamps. I stocked up on some incandescents to weather the ban. But then the LEDs got better, the choices among light shades got much better (daylight, cool white etc), and now many can be selected on the bulb. New electronics offered "on at dusk, off at dawn" and motion sensors. Even the prices got better. So I've now been completely converted. Every new replacement is now an LED. And I think I have a few incandescent spares I will never use.
Post: A Very Humble Saving
Link to comment from October 4, 2026
That fourth point is the one that can have a positive effect and that we fail to appreciate. While inflation keeps taking a bite out of what we have, we fail to recognize that over the years, what we get for our money for a high percentage of our purchases usually keeps getting better. TVs are electronic miracles. Same with telephones. Same with hearing aids. Same with cars. Same with power tools and lawnmowers. Etc. Etc. One can point to lots of things that have been cheapened - clothing quality, some appliances, and the like - but on balance what we own now would wow our parents and grandparents.
Post: Jonathan’s Parting Thoughts: No. 6
Link to comment from October 3, 2026
I agree with you. That's the reason I have my home completely termite-proofed again after about eight or ten years. I tell the guy to treat it like it was never treated, and to make sure he gets every nook and cranny. My parents bought a house that had had a little termite damage in the early 1960s, and it had been completely remediated, But when we sold the house in an estate sale more than 50 years later, the buyer still wanted assurances that there were no more termites. So, I don't want the "tails" to follow of any similar event
Post: Laundered
Link to comment from October 3, 2026