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Bonds, Bonds and More Bonds

Jonathan Clements  |  November 17, 2015

STOCKS GET ALL THE ATTENTION, which seems a tad unfair. The value of bonds worldwide is some 35% greater than the value of all stocks—plus many other parts of our financial life look suspiciously like bonds. How so? Think about all the streams of steady income that folks collect.
We pull in interest from bank products like savings accounts and certificates of deposit. We collect Social Security retirement benefits. If we’re lucky, we are the recipients of a traditional employer pension plan.

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Settling for Six

Jonathan Clements  |  November 11, 2015

SINCE RETURNING TO LIFE as an ink-stained wretch early last year, I have been talking about the likelihood of modest stock returns. My best guess: A global stock portfolio might notch 6% a year over the next decade, while inflation runs at 2%.
It turns out that the person I admire most on Wall Street, Vanguard Group founder John Bogle, also has modest expectations. This is no great surprise: How I think about stock returns has been greatly influenced by Jack’s writing.

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Keeping It Private

Jonathan Clements  |  November 8, 2015

FAMILY CAN BE A WONDERFUL ASSET. Your parents, siblings and adult children might help with home repairs, offer free advice based on their professional expertise and take care of the dog while you’re on vacation.
When the circumstances are right, I think there’s an opportunity to take this even further. For instance, earlier this year, I provided my daughter with a private mortgage, which allowed her to purchase her first home. There aren’t many people I’d strike that deal with,

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Social Security Revised

Jonathan Clements  |  November 2, 2015

TWO KEY CHANGES to Social Security retirement benefits were wrapped into the budget bill passed by Congress last week. The changes have big implications for married couples.
First, after April 2016, if you suspend your benefit, any family members collecting benefits on your earnings record will also have their benefit suspended. Second, those who aren’t age 62 by Jan. 1, 2016, will lose the right to file a restricted application, where you claim just spousal benefits,

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Wasting Time

Jonathan Clements  |  October 27, 2015

STOCK MARKET GYRATIONS since mid-August have investors focusing intently on short-run returns. But if you can drag your gaze away from the daily turmoil, you’ll realize this is a colossal waste of time—and a huge distraction from the big story.
This thought occurred to me as I was playing around with the data available at MSCI.com. Take the MSCI World index, which includes 23 developed markets, including the U.S.  From the index’s year-end 1969 inception through Sept.

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Social Insecurity

Jonathan Clements  |  October 21, 2015

SOCIAL SECURITY retirement benefits may eventually get cut. But it shouldn’t influence when today’s retirees claim benefits.
I have argued frequently that it makes sense to delay Social Security, especially if you’re the family’s main breadwinner. By postponing benefits from age 62 to age 70, you can lock in a lifetime stream of inflation-indexed income that’s 76% or 77% larger. That income stream could salvage your retirement if you outlive your nest egg, while also providing a handsome survivor benefit to your spouse,

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Mistakes Compounded

Jonathan Clements  |  October 14, 2015

A GOOD GRASP of compounding is fundamental to managing money. Without an understanding of the way money grows and shrinks over time, folks can’t fully appreciate the value of starting to save when they’re young, the damage done by large investment losses or the true cost of carrying credit-card debt.
Yet I fear compounding isn’t well understood. This has dawned on me over the past month, as I’ve been teaching an undergraduate course on personal finance.

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Eight Signs You’re a Seasoned Investor

Jonathan Clements  |  October 9, 2015

AS THE STOCK MARKET YO-YOS up and down, I figured it was worth taking a step back and talking about how investors should behave. Below is an excerpt from the Jonathan Clements Money Guide. What does it mean to be a seasoned investor? Here are eight signposts:

You have mixed feelings about rising markets. Yes, it’s great that your portfolio has grown fatter. But it also means future returns will be lower.

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Beating Janet to the Punch

Jonathan Clements  |  October 3, 2015

IT’S ONE OF THOSE INDELIBLE teenage memories: visiting the Bank of Baltimore in suburban Washington, DC, in the late 1970s.  I would hand over my babysitting or lawn-mowing money to the bank clerk, who would slide my green bank book into some magic typewriter. After a joyous clatter of keys, my bank book would be returned, and there would be recorded not just my deposit, but also the latest quarterly interest payment.
My children and stepchildren—ages 10 to 27—all have bank accounts.

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What Tax Losses?

Jonathan Clements  |  September 30, 2015

AFTER A TURBULENT few months for stock prices and with 2015 winding down, talk will soon turn to tax-loss harvesting. The notion: You sell losing stocks in your taxable account, and then use the realized capital losses to offset realized capital gains and up to $3,000 in ordinary income, thus trimming your 2015 tax bill.
Sound like a smart strategy? If you trade individual stocks actively or you’re a really bad investor, tax-loss harvesting might make sense.

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Less Is More

Jonathan Clements  |  September 24, 2015

“SOMETIMES, YOU HAVE TO GO BACKWARD to go forward.” That’s my advice to financial advisors in my latest article for Financial Planning. The advice is equally applicable to the typical investor. To get the most out of your money, occasionally you may want to take steps that trim your portfolio’s value in the short-term.
Examples? It often makes sense to live entirely off savings in your early retirement years, while delaying Social Security benefits to get a larger monthly check.

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31 Rules of the Road

Jonathan Clements  |  September 21, 2015

SOMETHING HAD TO GO. The final chapter of the Jonathan Clements Money Guide 2015 was devoted to 31 rules for the financial road ahead. For the Money Guide 2016, I’m replacing that chapter with a new final chapter, which details how to create your own financial plan in 18 easy steps.
But even as I axed the 31 rules from the manuscript, I figured they deserved a permanent home.

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Without Distinction

Jonathan Clements  |  September 17, 2015

IF WE WORK like dogs for 40 years, we’ll get our reward, which is the chance to sit around and do nothing for 20 or 30 years. That’s the definition of a successful life, according to conventional financial wisdom. But it doesn’t sound like a whole lot of fun, does it?
My contention: It’s time to rethink the crazy distinction between work and retirement and, in the process, redefine what counts as a successful life.

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Bubble, Bubble, Toil and Trouble

Jonathan Clements  |  September 11, 2015

AS I WATCH the recent market turmoil, three thoughts come to mind—and one great hope. First, I feel like a shopper waiting for the next sale. As of yesterday’s market close, the S&P 500 was down a relatively modest 8% from its May high. If this drags on, without any further decline, I’ll eventually do a little buying and selling, to bring my holdings back into line with my target portfolio percentages. But to get enthusiastic about stocks,

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September Newsletter

Jonathan Clements  |  September 11, 2015

THIS MORNING, I hit send on my inaugural newsletter. What’s next for the markets? How can you get your kids started as investors? How can you get a little extra yield without getting whacked by tumbling bond prices? Those are some of the  topics I cover. My next newsletter will go out in early December. If you want to be on the distribution list for that issue, shoot me an email.

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