The Long View

Jonathan Clements: ‘Humility Is a Hallmark of People Who Are Financially Successful’

Episode Summary

The author and columnist shares insights about rising interest rates and mortgage paydown, crypto and meme stocks, and his own financial journey and portfolio.

Episode Notes

On the podcast today, we welcome back Jonathan Clements, who was among our first guests when we launched this podcast back in 2019. Jonathan is the founder and editor of HumbleDollar, and he is also the editor of a new book called My Money Journey, which is a compilation of essays from 30 individuals about how they found financial freedom. Jonathan also sits on the advisory board of Creative Planning, one of the country’s largest independent financial advisors and is the author of nine personal finance books. Earlier in his career, Jonathan spent almost 20 years at The Wall Street Journal, where he was the newspaper’s personal finance columnist and six years at Citigroup, where he was director of financial education for the bank’s U.S. Wealth Management arm.




My Money Journey, edited by Jonathan Clements

Current Conditions

What I Don’t Own,” by Jonathan Clements,, March 4, 2023.

Happy Talk,” by Jonathan Clements,, Nov. 19, 2022.

Behaving Badly,” by Jonathan Clements,, Sept. 18, 2021.

Nine Roads to Ruin,” by Jonathan Clements,, March 6, 2021.

New Rules for Success,” by Jonathan Clements,, Nov. 26, 2022.

Pay It Down,” by Jonathan Clements,, Aug. 17, 2019.

Indexing, Retirement, and Real Estate

Four Questions,” by Jonathan Clements,, Feb. 22, 2020.

Jonathan’s Portfolio,” by Jonathan Clements,

Mix and Match,” by Jonathan Clements,, Dec. 4, 2021.

Risking My Life,” by Jonathan Clements,, Aug. 8, 2020.

Jonathan’s Retirement,” by Jonathan Clements,

How to Overhaul Your Retirement Portfolio in Just 7 Days,” by Jonathan Clements,, Jan. 3, 2019.

The Long Game,” by Jonathan Clements,, Feb. 4, 2023.

Jonathan’s Homes,” by Jonathan Clements,

Theory and Thrift

Helpful in Theory,” by Jonathan Clements,, Feb. 11, 2023.

Don’t Overdo It,” by Jonathan Clements,, Jan. 23, 2021.


Jonathan Clements: ‘It’s in Wall Street’s Interest to Make Everyday Investors Think That They Are Stupid,’” The Long View podcast,, July 31, 2019.

Credit Scores and Committed Relationships,” by Jane Dokko, Geng Li, and Jessica Hayes,, August 2015.

Morningstar Investment Conference 2023

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Episode Transcription

Christine Benz: Hi Long View listeners. We’re taking off this week for the holidays, so we’re rerunning one of our favorite episodes of 2023—our conversation with author Jonathan Clements. We look forward to having more great conversations about money and investing in the year ahead. Thanks for listening and happy new year! 

Hi, and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar.

Jeff Ptak: And I’m Jeff Ptak, chief ratings officer for Morningstar Research Services.

Benz: On the podcast today, we welcome back Jonathan Clements, who was among our first guests when we launched this podcast back in 2019. Jonathan is the founder and editor of HumbleDollar, and he is also the editor of a new book called My Money Journey, which is a compilation of essays from 30 individuals about how they found financial freedom. Jonathan also sits on the advisory board of Creative Planning, one of the country’s largest independent financial advisors and is the author of nine personal finance books. Earlier in his career, Jonathan spent almost 20 years at The Wall Street Journal, where he was the newspaper’s personal finance columnist and six years at Citigroup, where he was director of financial education for the bank’s U.S. Wealth Management arm.

Jonathan, welcome back to The Long View.

Jonathan Clements: Christine, Jeff, it’s great to be with you again. Thanks so much for having me on.

Benz: We’re excited to talk to you. We want to delve into the book that you just edited, that just came out, My Money Journey. But before that, we thought it would be good to delve into current events a little bit. We haven’t talked since 2019, prepandemic. A lot has changed obviously since then. What have been the most surprising developments from a financial or investment standpoint as you reflect on this pandemic and postpandemic period?

Clements: I think when I think about 2020 and again, about 2022, what really strikes me more than anything else is the resilience of the global economy and the extraordinary energy of people around the world. If you think about what we’ve been through in 2020 and again in 2022, we had the economy come to a standstill, we saw this sudden surge in inflation and yet, people rushed to adapt. And it wasn’t just the manufacturers of vaccines who produced vaccines to combat the coronavirus in short order; it was everyday businesses. The way restaurants turned their whole operation around so they could continue to operate in 2020. Here in Philadelphia, we’ve for years now, it seems, had these restaurant sheds in the middle of the street so that restaurants could continue their business. And what I find so endearing about that is the relentless way that people set about to improve their own lives every single day, and that energy is what should give us as investors optimism about the future. People every day wake up trying to figure out how are they going to make their lives better and as a consequence, for those of us who are best in the stock market, we are the beneficiaries because of the global growth that results.

Ptak: After a tough market like we saw in 2022, we often see investors overcorrect and behave less than rationally. Following the global financial crisis, for example, we saw a torrent of inflows into bond funds even though yields were really low. Are you seeing anything similar, similar sorts of behaviors this time around?

Clements: Well, Jeff, my view on the world is really through the eyes of the readers of the little website I run, HumbleDollar. Back in 2020, I did hear from some people who sold at the bottom of the market and obviously with great regret. But in terms of 2022, I think because we were hit on both the stock and bond side of the portfolios, I haven’t heard about a lot of panic selling. I’ve heard a fair amount of pessimism about the future, but I haven’t heard about a lot of panic selling.

I think one of the interesting things about bear markets is, in many ways, all bear markets are the same, but they aren’t the same to the extent that the narrative is different. If the narrative was the same every time, nobody would panic, nobody would sell, nobody would get massively depressed. But because the narrative that underpins each bear market is different, people find another reason to freak out, and that’s why we get investors behaving badly. So, yeah, the narrative in 2022 as well as in 2020, those were different. But what it meant for you as an investor, what you should be doing was the same, which is that you should stand your ground and to the extent that you have extra money, you should be funneling it into the depressed parts of your portfolio, and to the extent that you don’t have extra cash, you should at a minimum be rebalancing.

Benz: Going back to this idea of investors behaving badly, we haven’t discussed cryptocurrency or meme stocks with you, I don’t believe. I’m curious what was your thinking as the euphoria around those types of assets was in full swing a couple of years ago?

Clements: I think, like anybody who is a rational investor, you just sit there, and you scratch your head and go, what in the world is going on? For me, it felt very much like the late-1990s when these dot-com stocks took off. And I had no sense for what was driving all of this, whether these stocks made sense, whether you should buy. And I had the same sense when it came to meme stocks or SPACs or cryptocurrencies. Does this in any sense make sense? Should I be invested in them? And I think the answer to that, and something to keep in mind for the future, is every time a new hot trend comes along, you don’t need to get involved. Between broad stock market index funds and broad bond market index funds, investors have the two great tools they need in order to meet their investment objectives. When this fringe stuff appears on the horizon, it’s OK just to say, all right, well, that looks interesting, but in terms of my own financial future, there’s no need for me to get involved.

Ptak: You’re not a banking specialist, but what do you think should be consumers’ main takeaways from the recent developments in that sector? How should that inform where to park their safe money that they really need, so to speak?

Clements: Well, I think, one of the things that seems to have underpinned the collapse of Silicon Valley Bank is this basic problem that afflicts us in many different situations, which is, borrowing short and lending long. So, apparently, the reason that Silicon Valley Bank got into trouble was, it was borrowing short, it was taking in deposits, and then it was taking that money and investing it in longer-term bonds and when longer-term bonds took a hit, Silicon Valley Bank ended up in trouble. So, for those of us who are individual investors, we should think about situations where we might end up borrowing short and lending long.

One place where that happens is obviously with margin loans—the reason why I’ve never borrowed on margin. Similarly, it’s another reason to be leery of leveraged closed-end funds, like the leveraged bond funds, which borrow short and then factually lend long by buying longer-term bonds. But it also occurs in something as simple as a home purchase. We borrow and then we invest in this longer-term asset, this house. The good news is that you can’t get a margin call on a house purchase, but you are indeed borrowing short term as it were and investing this asset that’s going to appreciate, one hopes, over many decades but very possibly might go down in value this year or next. So, that’s a fundamental issue that people should think about.

In terms of safe money and investing in bank, well, if you’ve got more than $250,000 sitting in one bank in one type of account and you’re above the FDIC insurance limit, yeah, you could find yourself with a problem. Frankly, if somebody’s keeping $250,000 in a checking account at a bank, probably they either need to figure out some better place to put that money, or they should find themselves a good financial planner to help them out.

Benz: We want to switch over to discuss the book, My Money Journey. It’s a compilation of essays from people about how they found financial freedom. The book’s authors are all contributors to your website, HumbleDollar. Can you discuss how you decide who gets to contribute to HumbleDollar and in turn the book?

Clements: So, when I launched HumbleDollar at year-end 2016, I didn’t really know how this website was going to evolve, but I was interested in having other people blog for the site. But I was in no position to pay anybody big bucks. And in fact, what people get paid, those who accept payment, is tiny. So, because I was operating that way, I wasn’t going to get many professional journalists writing for me. I was looking for everyday investors who had stories to tell. And one of the things that I said to contributors then, and I can continue to say contributors now, is that you may not be a financial expert; you may not know everything about estate planning or putting together a portfolio or what sort of insurance you should have. But you are an expert on your own life. So, if you talk about your own life, you have credibility, credibility born of the experience that you’ve had. So, that has become the mainstay of HumbleDollar articles and blog posts, which is people talking about their own financial experiences. And I think for readers, it’s illuminating to know how everyday people manage their money. When it came to who contributed to the book, it was very simple. I have probably 50 or 60 people who write for HumbleDollar either regularly or occasionally. I shot out a mass email and said anybody want to contribute to this book? And 29 other people put up their hands and said, “Sure, I too will contribute an essay.” And that’s how we ended up with 30 essays in the book.

Ptak: I think this is true of both Christine and I, but when we read a really great personal finance book or a blog post, we often think to ourselves shoot, I wish I’d written that. Did you have any such moments as you were reading each of the chapters of the book?

Clements: Yeah, I think from a writing perspective, from a writing perspective, one of the best chapters is a chapter by a guy called John Goodall. He’s an attorney. He was in the army for many years. He’s now left the army. But what John talked about was he took the topic about how to achieve financial freedom and he discussed three ways in which he had failed to achieve financial freedom; three things that had set him back on the path to financial freedom. He talked about adopting three kids. He talked about an expensive car that he bought while he was in Afghanistan on active duty. And those descriptions of those ways that he set back his journey toward financial freedom I thought was very clever because not only did he identify moments when we should say to ourselves, OK, hey, maybe I shouldn’t be putting everything toward helping my future self. Maybe I should be doing something for myself right now. But it was also from a writing perspective clever to the extent that I presented him with this challenge—talk about your journey toward financial freedom, financial independence—and then, instead of discussing that, he talked about ways that he hadn’t done so. And as a fellow writer, I admired that.

Benz: I wanted to ask about that because one aspect of the book that I really liked is that many of the essayists discussed their low points and how they were able to recover from various financial setbacks in their lives, career changes, investment losses, and so on. Were you struck by that too that so many of the stories were actually sort of stories of redemption?

Clements: I’m not that surprised by that, partly because I know, at least through email contact, occasional phone calls, and a few in-person meetings, I have come to know the contributors to the website, and I know that they all have some level of humility and they’ve come by their financial wisdom the hard way. But I think that’s also a hallmark of people who are financially successful. We’re all going to make mistakes. I’ve made financial mistakes. I’m sure you all have financial mistakes that you would fess up to. And to be a good manager of your own money what you need to do is to reflect on what you’re doing and to learn from the things that you’ve done wrong. If you don’t have that self-reflection, you’re going to be one of those people who make serial investment mistakes moving from one hot investment product to the other and losing over and over again. What you need to improve as an investor is to think about hope. That didn’t go right. I’m not going to fool myself that I did better than I really did, and I want to do better going forward. So, yeah, I’m not surprised that people are talking about mistakes they made because that’s how they learned.

Ptak: Yeah, that capacity to learn, humility, definitely success factors. It seems that some of the factors that also contributed to financial success for the authors were commonplace variables like thrift and using low-cost investment products. Were there any recurring success factors that were more surprising to you as you read the book?

Clements: Well, beyond this ability to reflect on what you’ve done wrong, I think the other thing that is important to realize is that all of these people grew financially successful over time. Time is a huge element in financial success. If you’re going for the quick win, you’re more likely to end up with the quick disaster. For most of the writers, their financial journeys have been long, and it’s been years of, as it were, toiling in the darkness, not sure whether you’re really making a lot of financial progress and then waking up one day and saying, hey, I have enough money to do whatever I want for the rest of my life. I think beyond favoring index funds or beyond being super thrifty or any of these other financial virtues that we might talk about, I think it’s that act of doing the right thing over and over again for many, many years that pays off. It’s the time element. It’s the patience. It’s just going through your life and socking away a few bucks, staying diversified, and really, to some degree, not thinking about it too much. And then, bang, you suddenly discover that you have more money than you could ever possibly imagine.

Benz: Do you think part of the success for so many of the contributors is just that it’s been a really great equity market, especially in the U.S., for several decades now?

Clements: No doubt that it has been a huge factor. But in order to have benefited from those great financial markets, one, you need to have been involved in them, you need to have been an investor and stuck with it. But two, even more important than that, you need to be a great saver. And probably the one attribute that shines through in almost every one of the essays is the importance of thrift, the importance of frugality. These people who wrote for the book and who also contribute to HumbleDollar—and you need the readership of HumbleDollar—all these people are great savers. They don’t necessarily have the highest incomes, but they’ve found ways to sock away money, and that’s meant that when the stock markets have done well, they have money in place that gets to benefit from those rising share prices.

Ptak: Many of the authors noted that their parents set them on a good path by modeling out good financial behaviors. As you reflect on that aspect of the essays, are there any lessons, I should say, that parents should come away with?

Clements: Reading those essays as a parent is a little horrifying, because you realize how loud your voice rings in the ears of your children. It certainly makes me think about the things that I said and tried to teach to my kids when they were younger, because I can see now—they’re both in their 30s—I can see the influence of what I set out to teach them. And in some ways, I worry that I might have taught them too well. My kids are both very careful with money. My son just is wrapping up his Ph.D. at Yale in Middle East history. He’s been at it for seven years. And during the course of those seven years on his $30,000 a year stipend, he has managed to save more than $100,000. And I look at that and think maybe I taught him too well. So, if you are a parent and you’re trying to teach your kids about money, you should really be very thoughtful about what you say and what you model. Your kids will hear your voice louder than any other voice in their lives, and they will either behave very similarly to you or they will reject what you do. But whatever it is, you as the parent need to be really careful in thinking about how you behave and what you say.

Benz: Many of the book’s contributors discussed spousal relationships as being central to their stories. Either they had a financially compatible partner, or they broke up with a partner who wasn’t financially compatible. Do you think that’s something that tends to get underplayed a bit in personal finance discussions, the importance of finding a partner who is financially healthy and also has a similar mindset toward money?

Clements: That’s a really great question, Christine, and it’s not an issue that I’ve thought a lot about. But I do know that there are studies that have looked at the influence of whether you are financially compatible with your spouse or not. I remember there was one study—I think it came out of the Federal Reserve—looking at couples who had similar or vastly different credit scores. And if the couple had vastly different credit scores, they were much more likely to end up getting divorced. So, financial compatibility is clearly important.

In terms of the contributors to the book, there was one contributor, a guy called Phil Kernen, who is a bond expert based in Kansas City. And Phil worked with his spouse to pay off their mortgage in short order because he really saw paying off the mortgage as being the key to buying themselves some financial breathing room. So, he and his wife along with the kids focused on paying down the mortgage and as part of that put together this jigsaw puzzle of Mickey Mouse. And when they finally paid off the mortgage and put the final pieces into the puzzle, they were all going to take a trip to Disney World. When you read that and you think about this husband and wife working together, inspiring their kids along the way to pay down the mortgage and then having this reward of going to Disney, I find that endearing and clearly, you can’t do that sort of thing if you aren’t supportive of one another, if you’re not all on the same page and focused on the same goal.

Benz: Not to get too in the weeds on financial planning matters, but I wanted to follow up on mortgage paydown, which is a perennially controversial topic. It seems that perhaps the landscape has changed a little bit, where a couple of years ago, you had this disconnect where it was impossible to outearn your mortgage rate even if you had a really good mortgage rate on safe securities. Now, I think it’s probably likely that a lot of mortgage holders have mortgage rates that are below what they can earn on savings. So, can you walk through how you think people should approach mortgage paydown and arrive at the right decision given their own personal situation?

Clements: It’s actually a very interesting issue right now, because as you suggest, Christine, the whole math of paying down a mortgage has changed after 40 years. Because now, for many people, bond yields are above what folks are paying on their mortgage. It’s always been the case that if you had a choice between paying down a mortgage or investing in the stock market, you should probably invest in the stock market. You’re going to get a higher return there. But until recently, that wasn’t the case when it came to the bond market. But the fact is today, yes, you can get a higher return by putting your money into bonds than paying off that mortgage, which you might have taken out a couple of years ago and has an interest rate of 3% or less.

That said, I hear this again and again that a lot of people do find it emotionally satisfying to get their mortgage paid off, to be debt-free. And if somebody says, from my sense of financial security, I would rather get this mortgage paid off so I don’t have to worry about this big monthly nut, so that I have the financial breathing room to retire, swap to a less-lucrative career, whatever it is, I’m not going to discourage them. Sure, go ahead and do it. We talk about personal finance, but most of the time what we’re talking about is finance. But the personal aspect is really important, and people need to do what it is that is necessary to feel financially secure. I think that is one of the keys to happiness is the sense of financial security, and if getting rid of your mortgage is going to make you feel more secure and hence happier, hell, why not do it?

Ptak: Wanted to shift gears and talk about your journey in retirement. You’ve written about your own financial journey in the book in an essay called “Now and Then.” From an investment standpoint, one of your biggest successes was embracing index funds and maintaining a fairly heavy equity portfolio. What was the aha moment for you with respect to owning index funds and not messing around with individual stocks and active management?

Clements: In the early days, when I barely had two nickels to rub together, I did own some individual stocks, and I did own actively managed funds. I started as an investor in 1986 and 1987. Having just come back from England, I didn’t have much money. But at that time, the array of index funds on offer was really very limited. If you were going to build a diversified portfolio, you almost had to own actively managed funds or dabble in individual stocks. But early on after I arrived back in the States in 1986, I read and eventually got the chance to talk to three people who I credit with my financial education, Jack Bogle, Burt Malkiel, and Charlie Ellis. And thanks to those three, the books they wrote, the conversations I had with them, I very quickly became a hard-core indexer. And anybody who followed my stuff over the years knows that became this perennial theme. I wrote about index funds so often at The Wall Street Journal that it almost became a joke. People thought that I was completely repetitive, just blathering on about the same stuff over and over again. But in terms of that advocacy of index funds, I would say that there aren’t many things that I got right in my life, but that advocacy, I’m quite proud of.

Benz: Charlie Ellis contributed an essay to the book, too, I should say. Going back to your essay, you noted that you tended to step up and add to stocks in periods of market weakness. Can you talk about what were your cues to add stocks? Were you using rebalancing as your trigger? And I’m curious to know if you were adding to stocks just in this recent market disruption last year and perhaps back in March 2020 at the onset of the pandemic?

Clements: Christine, when it comes to investing, I claim no special insight. If I have any investing superpower, it’s the belief in my lack of investment ability, my willingness to just buy broad market index funds and shovel money into them month after month. But over the course of my investing career, whether it was the market decline of 2000-02, it was early 2009, it was early 2020, or it was last year, when we’ve had these sharp declines in the stock market, I have stepped up the plate and I have bought heavily and I have strayed from my asset allocation. So, for instance, last year, my target stock allocation, according to my little spreadsheet, is 80% stocks and I think I got up to 86% or 87% stocks. I’m probably still right around there right now, which obviously is way over where I’m meant to be according to the rules I laid down for myself.

So, what prompts me to do that? I hate to say it’s horribly unscientific. I have, over the years, paid attention to all of those market metrics that I learned about early in my investing career—price/earnings ratios, price to book, dividend yield, more recently Shiller P/E, and what I’ve learned is that they really aren’t very good signals when stocks are over- or underpriced. So, when it comes to investing heavily in stocks, I tend to make these shifts, one, when the market is down sharply, 20% plus; and two, when I read about people panicking and people expressing pessimism about the future of the world. It’s as simple and perhaps as stupid as that, but that is what I do. When I see people getting all bent out of shape about the stock market because it’s down 20-plus percent, that’s my signal to say, hey, it’s time to move a few more thousand dollars into the stock market.

Ptak: What’s the framework that you use for determining the split between, say, U.S. and non-U.S. stocks or really any sort of regional mix for that matter? And maybe I should have started by asking whether you think it’s important to internationally diversify when it comes to equities as we know there were some, like Bogle, who felt just plunk it down into a total stock market U.S. tracker and you’re good, whereas others say that you should spread it out across company stocks that are domiciled all around the world. What’s your take and how do you approach it?

Clements: I think there are two approaches to portfolio building. The approach I used to take was that U.S. stocks were your engine of growth and then you thought about ways to diversify that. So, if you thought that 20% of foreign stocks would provide sufficient diversification, you would go for that 20% in stocks and then, depending on where you are in your lifecycle and your upcoming financial needs and so on, you would have the appropriate allocation to bonds. But probably several years ago, I changed my approach, and I decided that the global market portfolio should be my starting point in designing a portfolio and then I should decide what I want to subtract. The only thing that I have already subtracted from that global market portfolio are foreign bonds. I don’t see the need to have foreign bonds in my portfolio. I don’t really want to introduce the currency risk into what’s the safe portion of my portfolio. But in terms of the mix of U.S. and foreign stocks, I have pretty much a 50-50 split between the two, and my intention is to stick with that. I do not have a crystal ball. I do not know which part of the global financial markets are going to do best in the years ahead. And so, in my ignorance, I think the best defense is to own a little bit of everything. So, that’s why I have pretty much equal holdings of U.S. and foreign stocks.

Benz: You mentioned to me that as you have approached and thought more about your own retirement, you’ve gotten more interested in the topic and it’s also just, I think, a fundamentally interesting topic. As you think about your investment positioning when you actually do fully retire, can you talk about what you anticipate your portfolio will look like at that time and recognizing that this is very individual-specific, not necessarily guidance that people should extrapolate into their own situations?

Clements: I’m glad you threw in that caveat, Christine. I’m probably a little bit of an outlier on this. But I have, one, oversaved for retirement. We can talk about that later. But I have more than I really need for retirement, which allows me to continue to carry a stock-heavy portfolio. My written asset-allocation calls, as I mentioned, for 80% stocks and 20% in short-term bonds. And the way I settled on that is that with 20% of my portfolio in short-term bonds and you throw a 4% withdrawal rate on top of that, 20% in bonds will cover five years of portfolio withdrawals to cover my expenses.

I am not yet fully retired. I still earn enough to cover my living costs even if I’m not saving a whole lot of money each year at this point. I have reached the lofty age of 60 in case people are wondering. So, my target is 20% in bonds to cover those five years of portfolio withdrawals. I’m above that right now because the market is depressed. Will I head back to the 80%? Yeah, probably. But as I look ahead to fully retiring, one, I know I’m going to have Social Security—and I was a little shocked when I went on the Social Security website apparently. If I delay Social Security till age 70, I’m going to get $48,000 a year. I don’t know about you high-living types in Chicago. But here in Philadelphia, $48,000 pretty much covers what I spend each year. So, I’m not sure I’m going to need a whole lot of money from my portfolio. And on top of that, and I’m happy to talk about it, I am planning to put at least some of my portfolio into immediate fixed annuities that pay lifetime income.

Ptak: That’s interesting. So, you just mentioned annuities. You don’t, given your retirement secure, I suppose we would say, position that you’re fortunate to be in, you don’t seem like you would necessarily be a candidate for an annuity, but it sounds like that’s something you’re planning on doing anyway. So, maybe you can talk about your own situation, how you came to that conclusion? And then, more broadly, why it is you found merit in the sorts of annuities that you’re eyeing for your own retirement for the more general population out there, including those that may not be quite as retirement secure as you are?

Clements: Jeff, as I mentioned, I plan to delay Social Security to age 70 and I also plan to put some portion of my portfolio into immediate fixed annuities that pay lifetime income. And the reason I’m doing both is really twofold. First, by delaying Social Security and by buying immediate fixed annuities, I free up myself to invest more heavily in the stock market. And that, as we all know, is going to be the engine of growth. So, when I think about buying immediate fixed annuities and delaying Social Security, what it says to me is, I free up the need to keep as much money in bonds as I potentially have to. So, if I bought those immediate fixed annuities and I delay Social Security to age 70, I may at that point be able to hold an even higher percentage of my portfolio in stocks. I might be able to go over 90%. I haven’t really made that decision yet, but it certainly opens up that possibility. And second, in doing those things, I’m thinking about my partner in life and how I can provide for her, and delaying Social Security, if we were married at that point, she will get that as a survivor benefit. And if I bought the immediate fixed annuities, I would get them as joint and survivor so that she would continue to get the income after I’m gone. So, it’s not just about my financial situation, but also thinking about what would happen once I am gone.

Benz: Well, that’s an important point. I wanted to ask about the inflation risk with those immediate type annuities where it seems like if inflation continues to run a bit high, as it has recently, that that obviously gobbles up some of the purchasing power from the annuity payouts. Can you discuss how you’ve thought about that and whether that’s a worry for you?

Clements: It’s clearly a risk, but it’s also, of course, a risk for anybody who has a bondlike investment that’s paying a fixed stream of income. I do think that I will probably buy immediate fixed annuities that have this automatic step up 2% or 3% a year. That, of course, reduces the amount of income you get right away, but it does mean that you will have some protection against inflation. As far as I know, there isn’t a true inflation-linked immediate fixed annuity available today. So, buying these 2% or 3% step-ups each year is the best that you can do. I could also set aside some money and at some point in the future choose to buy an additional immediate fixed annuity to provide additional income and thereby offset some of the impact of inflation. There isn’t a good answer to this one, but I think having lifetime income is hugely valuable. If you could get inflation-linked, that would be better. But as of right now, it’s a problem that can’t really be properly solved.

Ptak: Wanted to ask you about bonds. We’ve been hearing a lot of enthusiasm for individual bonds versus bond funds because the investor can match a specific bond to his or her spending horizon. There’s probably some psychological benefits that they accrue from that as well. Do you think most individual investors, should they use individual bonds or bond funds? And then, also, do you think something like a target maturity bond ETF maybe that could strike a good balance between the two?

Clements: Jeff, I get frustrated by this discussion of individual bonds versus bond funds. The fact is, if you go out and you buy a set of seven-year bonds or you go out and you buy an intermediate-term bond fund that holds similar sorts of bonds, over the course of those six to seven years, you’re going to get a very similar return. With the individual bonds you may know what you will precisely have in nominal terms, but whether you buy the individual bonds or the bond funds, unless you’re buying TIPS, you don’t know what it’s going to be in inflation-adjusted terms. So, the precision is a little losery in my mind. And in return by buying those individual bonds, of course, you’re taking a lot of credit risk unless you’re buying Treasuries. So, you could go out and have what I consider to be the false position of owning a handful of corporate bonds and then discover that one of your 10 bonds goes belly up and suddenly you’re off 10%.

On top of that, what I would think about is what is the role of bonds in your portfolio. I don’t think of bonds as being bought to match to pay for some specific goal seven or 10 years down the road, whatever the maturity of those bonds are. Instead, what I see bonds as is a pool of cash to draw on when I don’t want to tap into the stock market. That’s why I buy short-term government bonds, short-term TIPS. I want this pool of cash if the time comes when the stock market is down that I need to get a big chunk of cash. So, I don’t really think about that precision in terms of holding a bond to maturity. I don’t think about what particular goal I’m paying for when that bond matures. Instead, I just have a certain set of cash to cover a certain amount of living expenses, and I have that sitting there. I’m not investing for the yield for some particular future date.

Benz: You mentioned that one of the reasons you hold bonds is to be there if your equities drop. But obviously, that did not work last year. And I think, in some quarters, people are having a crisis of confidence about whether that 60/40 or balanced portfolio mix really makes sense. How should people think about that? Should they be permanently disillusioned about the power of a balanced equity bond portfolio?

Clements: Two different answers to that, Christine. First, total bond market funds or the broad bond market was down sharply, but my bonds weren’t down very much. I own short-term governments and short-term TIPS. I lost 2% or 3%, but hardly worth crying about when the stock market is down 20%. In terms of the balanced portfolio, crying about it now seems a little bit like crying about the horse that bolted. It’s too late to close the gate now. You’ve taken your hit. Probably at this point holding a balanced portfolio is a perfectly fine thing to do. You’re getting a decent yield on the bonds side. You’ve taken your hit from rising interest rates it seems like. If the balanced portfolio wasn’t a good thing to hold at the beginning of 2020, it’s certainly a much better thing to hold now.

That said, if somebody came to me and said what sort of portfolio would I hold? I go back not to Bill Bernstein, but to Peter Bernstein, who in the 1980s wrote this great paper about how if you held roughly 75% in stocks and 25% in cash or cashlike investments, you were getting something that looked very similar to the classic 60/40 portfolio, and that idea has always stuck with me, and it’s why I’ve always preferred to take risk on the stock side of my portfolio while playing it super safe on the bond side of the portfolio. For people who don’t want to run the risk of seeing both the stock and bond side of their portfolio go down in the same year, I would suggest exploring the possibility of going more heavily into stocks and playing it much more safely on the bond side of your portfolio.

Ptak: We wanted to ask you about your various successes and failures with real estate from a financial standpoint. Can you summarize what you’ve learned through these experiences during your lifetime?

Clements: I have now owned, Jeff, I guess one, two, three—I’m on my fourth house. So, I don’t know how this fourth one is going to play out. But of the previous three, one was an unmitigated disaster, one was a great success, and one was so-so. So, what does that tell me? Well, one, I would argue that owning your own home is not really an investment. It’s somewhere on the cusp between investing and consuming, and the bigger portion of it is the consumption side. You can take a home’s total return and divide it between the price appreciation and the imputed rent that you receive as the homeowner, and the imputed rent is by far the largest element of the total return. The fact that you get to live in the place, that’s the big return from owning a home.

In terms of price appreciation, it’s a dodgy proposition and particularly one, if people do an honest accounting, for instance, factor in all the money that they pay for things like remodeling. So, when it came to the one that was an unmitigated disaster, that teaches a second lesson, which is that a home is a big undiversified investment. The house in question was actually an apartment. It was an apartment that I owned just north of New York City. It was a beautiful apartment. You could look out the window and see across the Hudson. And then, this thing called the coronavirus hit. And I was trying to sell the apartment. And not only did I discover that people did not really want to live in close proximity to each other in the midst of a global pandemic, so interest in apartments dried up, but also in trying to sell the apartment I discovered that what I really owned was two apartments that had been apparently illegally combined when I was one years old. So, when I finally had a buyer for the apartment, I was forced to go to the town and get them to approve the combination of these apartments more than 50 years after they had happened. I had to get a certificate of occupancy in order to get the sale to go through. It was a huge money drain, and it delayed the sale of the house by six months, and it pains me to think about it even today.

Benz: I wanted to go back to your own thoughts on retirement. You’ve referenced your sense of thrift during the course of this conversation. But it seems like one of the key mental shifts that financially successful people often grapple with when they actually do retire is figuring out how to transition from that lifetime of thrift to actually spending what they’ve managed to save. How do you think you’ll do with that issue?

Clements: Not well, Christine. I don’t think I’m going to do very well. When I think about money and how it can buy happiness, I can think about it in three buckets. First, it’s the sense of financial security that money can give you, and I greatly appreciate that aspect of having money. The fact that if you have money, you don’t really need to think about money. And that’s an enormous relief, an enormous source of happiness for me. And this also seems to be true of the general population. There’s a study that looks at sense of financial well-being and the money that people have sitting in the bank. And if somebody has $5,000 in ready cash and you compare them to those who have less than $250 in ready cash, the difference in reported financial well-being is enormous, just enormous. Just having a little bit of cash sitting around is a great comfort. So, that’s one use of money to give you this sense of financial security.

Second, money can be given away, and that can also be a great source of happiness. In terms of my own money, I am planning in the years ahead to focus very heavily on not only giving more to charity, but also ensuring that my kids are financially OK and how I can not only help them today, but also help them upon my death. And those two goals are very important to me and are source of great happiness. So, I think that giving away money can be a source of great happiness.

And then, we come to the third one, which of course, Christine, is what you talked about, which is spending the stuff. And that’s where I do struggle. I can see spending more in the years ahead. I would like to travel more. The one place where I’m still bargaining with myself is whether I will allow myself to travel in greater comfort. One of the things that becomes more of an issue as you grow older is flying across the Atlantic, sitting up all night in a coach chair—unable to sleep really does put a damper on your desire to travel. So, I’m bargaining with myself about whether I will allow myself to fly business class. I think that’s one expenditure I might be able to bring myself to make, but I’m not quite there yet.

Ptak: You discuss how one of the key things that you’re still trying to figure out is how to balance work with other things that you enjoy. Why do you think that’s so hard?

Clements: I think it’s a little delusional, Jeff. To think that anything that we do is that important in the world of 8 billion people is delusional. Nonetheless, we do get great happiness from striving, from doing good work that gives us a sense of purpose that we find fulfilling, that we are passionate about, that we think we’re good at. And I think that as people head into retirement, one of the things that they need to think hard about is what will give them a sense of purpose, what will get them out of bed in the morning, what will they find fulfilling. For me, this little website that I run HumbleDollar, that gives me a sense of purpose and I feel that it is worthy work, it’s a service to other people. But in thinking about the site and about what I do, what I’ve been trying to, again, bargaining with myself is to think about what success looks like. So, when you’re in your career and you’re aiming for the next promotion, the next pay raise, there’s always this goal in the future that you’re striving for, and you measure yourself by your ability to hit those goals, whether you get the promotion, whether you get the pay raise.

But once you head into retirement, those sorts of things go away. You still want to be doing the work that gives you a sense of purpose, but it’s more about being in the moment and striving for some distant goal that will say to you, oh, yes, I’m a success. So, I want to keep doing the good work, but what I’ve been talking to myself about is trying to take that notion of success off the table and say, hey, it’s OK just to do stuff every day that you enjoy without worrying about whether you’re going to reach some grand goal in the future.

Benz: Well, Jonathan, as always, it’s been such a treat to talk to you. Congratulations on the book and thank you so much for being with us today.

Clements: Hey, it’s my pleasure. Thanks for the conversation, Christine and Jeff. It’s really been great.

Ptak: Thanks again.

Benz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.

You can follow us on Twitter @Christine_Benz.

Ptak: And @Syouth1, which is, S-Y-O-U-T-H and the number 1.

Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.

Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at Until next time, thanks for joining us.

(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. While this guest may license or offer products and services of Morningstar and its affiliates, unless otherwise stated, he/she is not affiliated with Morningstar and its affiliates. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis, or opinions, or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)