Life After Full-time Work Blog

Thank you for your generous wisdom, Jonathan Clements

 

It will always be an honor for me that I corresponded with and interviewed Jonathan Clements. He had been a personal finance columnist for The Wall Street Journal, writing more than 1,000 columns. That’s how I came across him, and I loved his commonsense approach and the straightforward way in which he explained things. And after he left the WSJ, he founded the website HumbleDollar. So, when Alex Mazer (of Common Wealth) and I planned a series of podcasts in 2019 to accompany my book Life Two, I got in touch with Jonathan and he willingly agreed to be interviewed.

Something has gone wrong with the availability of the podcasts, which ought to be accessible from the Podcasts tab at the top of the donezra.com website. Oh well, I’ll see if I can get the problem fixed. Meanwhile, I have extensive notes on my reactions to the things Jonathan said. More about that later.

But first, about his passing. It was recent, in September of this year, at the unexpected age of 62. Unexpected, because about 18 months earlier he seemed to be in good health. And then one day he felt wobbly, and (long story short) was diagnosed with stage four lung cancer, and was told he probably had about a year to live. His subsequent braveness is an inspiring example to all of us.

Just days before his sickness was diagnosed, he had published a column on his website, ironically on how the likelihood of living to age 90 would change your thinking. It included this sentence: “[A]s I squint into the future from the not-so-grand age of 61, it occurs to me that there’s a chance I have three decades or more ahead of me, and it would be a shame to spend all that time focusing solely on fun and on short-term investment results.”

In the following month’s column he revealed his diagnosis and prognosis, mentioning that his lung cancer seemed to be the result of a defective gene, one that’s rare and without a promising treatment plan. And he wrote: “Weirdly, as of right now, I feel pretty darn good, and perhaps better than most 61-year-olds. Every morning, I’m stretching and lifting for 20 minutes, and then riding a stationary bike for 40 minutes.”

And he added seven instant lessons. (1) Managing money is fraught with uncertainty, but never more so than now. (2) Money is intimately bound up with regret. (So he planned to tick off some bucket list items, but mostly felt a profound gratitude for the life he’d had.) (3) The cliché is true: something like this makes you truly appreciate life. (4) We can control risk, but we can’t eliminate it. (5) It’s toughest on those left behind. (6) Generosity suddenly feels so much sweeter. (Partly because he’d no longer need most of his retirement savings. But more because, as he watched family and friends react to his diagnosis, he appreciated that most folks have an inherent goodness and they’re  constantly struggling to do the right thing, and a little generosity is a way to acknowledge that.) (7) Life’s priorities become crystal clear.

I had to control my tears.

In subsequent columns he expanded on his thoughts. He explained why he felt so grateful, via nine thoughts. (1) For most of my career, I’ve done work I thoroughly enjoy. (2) I’ve known enough bad times to have perspectives. (3) I have a close-knit family. (4) I got the chance to push myself to my physical limits. (He ran four marathons, and a half-marathon on a boat floating off the coast of Antarctica.) (5) I’ve had the opportunity to see much of the world. (6) While I worried a lot about money in my 20s and 30s, I haven’t worried much since. (7) On a handful of occasions, I’ve felt like I had the world’s attention. (Some of his WSJ columns generated more than 500 compliments.) (8) I’m getting to spend my final days with someone I love deeply and who loves me. (9) I’ve been afforded the time to contemplate my own death. (He considered it a great privilege to be able to answer the question of how he’d change his life if he just had a year or two to live.)

Again, tears to my eyes – particularly #3 and #8. And I’m guessing that most of us can identify with many of his reasons for gratitude – and perhaps that can start to generate deep gratitude in our own hearts and minds.

One other angle that I appreciated, as a financial geek: he said, “One thing that struck me about my list: while money is a factor in Nos. 1, 5 and especially 6, it’s of little or no importance to the other six items.”

His column seven months into his terminal diagnosis: I’ll simply provide the link. It’s too deep for me to do anything beyond saying that he deals with four questions. Am I afraid of dying? Am I using my time in the best way possible? Why aren’t I angrier about my diagnosis? How can I prepare to be my future self?

He published his final article in September, all about his life. It had been written to be published right after his death. Here’s the link.

So much wisdom! As fellow WSJ columnist Jason Zweig put it, “I have just lost a friend, and so have you.”

I’m lucky to have known you, Jonathan.

***

I said at the start that Alex and I interviewed Jonathan for our podcast series. His was the second in the series, and its theme was The Retirement Life Cycle. The simplest way to report it is to reproduce what I said about it at the time, in the final section of the podcast, which I called The Personal Touch. My goal was to take the insights that our global experts gave us in their interviews, and try to adapt them for ordinary people, to make their lives better, more practical, more fulfilling.

Here’s what I said about Jonathan’s insights.

***

Today’s episode is called The Retirement Life Cycle. In future episodes we’ll deal with the life cycle in stages. We’ll talk about Getting Started, Getting Serious, and Getting Set for Life Two, which is what retirement used to be called.

Jonathan Clements has observed life, he’s written about life, and of course he’s living it himself – in semi-retirement, as he expresses it. He’s very experienced about this subject. And yes, as we’ve heard from him, there really are stages involved.

He identifies three very broad stages.

The first takes you through your 20s and 30s and 40s. That’s the one we call Getting Started. The second lasts through the 50s and early 60s. That’s the one we call Getting Serious. Jonathan’s third stage is retirement itself, typically around 65 and beyond.

This is really useful. In my Personal Touch segments, I’m going to broadly use Jonathan’s three stages, and add two sub-stages, if you like. One will isolate the few years just before retirement – this is what we’ll call Getting Set. And the other sub-stage will focus on the period immediately following retirement, in which there’s a transition in progress, and you may not have settled fully into your post-retirement, your Life Two, lifestyle.

OK, so let’s see what is actionable, from Jonathan’s excellent interview. And, necessarily, also from Jonathan’s books and his HumbleDollar website, because we couldn’t possibly capture all his wisdom in a single interview.

By the way, this may be a good place for me to point you in the direction of a couple of books that I find helpful, but particularly so for those learning, in the early stages of saving and investing. I know you can find them on Amazon.

One is William Bernstein’s book called If You Can, a very short and simple book about investing, aimed at Millennials.

The other is by Jonathan. It’s called From Here to Financial Happiness. It’s got the same sort of structure I’ve used for my own Life Two book, some straightforward learning followed by exercises to apply the learning to yourself.

I’ve got no connection with either author – I’m simply an admirer of both.

***

In the interview, Jonathan deals with what’s rational to do – the technical side – as well as the human side: to visualize retirement, what would make you happy, what would make it fulfilling. Those two perspectives complement each other beautifully. And sometimes he has a very pithy way, a surprising way, to express a message. That helps us enormously.

Here’s the first big surprise. Retirement is our most expensive goal, so put it first.

You have lots of financial goals in life. The natural tendency, the obvious approach, is to deal with them consecutively. When you earn money, first repay your student loans, then the house, then the kids’ education, and THEN retirement. Oh no, says Jonathan – if you do that, there’s not enough time to do it well. You need to deal with the cost of retirement concurrently. In fact, because it’s the most expensive goal, you need to put it first.

Retirement is expensive – we heard that in our first Podcast episode. The longer you put it off, the more chance that it will become impossibly expensive.

In the early years, Jonathan reminds us, life is a pitched battle between your whiny present self and your future self. The way to help your future self – the one that will one day become your present self and will be the one to enjoy the happiest time of life, Life Two, as we saw last time – the way to help your future self is to automate your savings program. Make it so you don’t have to think about it. As human beings, we’re very susceptible to inertia – leaving things the way they are. Help inertia to be your friend, by making automatic saving the way things are, for you.

Another human factor Jonathan mentioned is to make a public commitment. You can tell yourself you’ll improve your behavior, but you’re much more likely to follow through if you’ve told someone else you’re really going to do it. You can let yourself down. But it hurts much more if you shame yourself by reneging on a commitment you made to someone else.

And a third human element is to visualize how good it’s going to be, to achieve your goal. I think that’s terrific. In my book Life Two, I’m your tour guide on a series of 24 walks that familiarize you with getting to and enjoying living in the land of Life Two. And, to get some of what we see on the tour fixed in your mind, and applied to you specifically, as I mentioned before, I ask you to perform exercises after each walk. (There’s really no better way to cement that learning.)

In the third Walk, I tell you that you don’t need to be an expert at anything. What you need is to be is an informed consumer of the expertise of others – just as you don’t need to be a doctor or lawyer yourself, you just need to be able to help them apply their expertise to you.

You are, in fact, the expert on the subject of … yourself. And the way to help others to help you, is to tell them something about yourself.

And one way to do this is for you to paint a picture of what success looks like, to you. It also helps, actually, to paint a picture of failure. It helps experts to be told what you consider a good outcome and what you consider a bad outcome. So too (as Jonathan suggested – this is my roundabout way of eventually getting to the point!) it’s very helpful if you paint for yourself a picture of what it’ll mean to you to have the time, and the freedom, and the money, to live life the way you want to – the way that Life Two opens up for you. Help yourself.

Jonathan also identified a lot of negative signals, if you recall. Ways in which we hurt ourselves. He called it “wealth departed.” He said that things like expensive cars and lavish vacations give that kind of signal. It tells the world we’re doing well financially. But it may be at the cost of eventually ourselves becoming one of the millionaires next door. Somewhere else Jonathan has written: “Experiences deliver pleasant memories. Possessions deliver repair bills.”

Bottom line: save diligently for 30 to 40 years. And now another surprise. He says that if we’re good savers, we’ll probably prosper even if we’re mediocre investors.

Wow, that’s unusual, because we always focus mainly on investing. Jonathan reminds us: even though investing is powerful, saving is even more fundamental.

He also mentioned the tipping point between saving and investing – that’s when the amount that the investment return each year adds to your wealth, becomes as large as the amount you put in yourself each year. Around year 12 (but who cares about the year number? – you know it’s going to happen) – and that’s what’s really encouraging and motivating.

By the way, if you want a demonstration of the numbers, check out my website, donezra.com, and go the blogs and look for Post #18, where I talk about what I call the 10-30-60 rule. I show the numbers there, relating to how wealth builds, and sure enough, it’s somewhere between years 10 and 15 where the investment returns start to exceed the contributions – Jonathan’s tipping point.

There’s one other thing I’ve heard Jonathan quote, that I want to bring to your attention. What if you haven’t started saving? Maybe it’s too late, right? Wrong. Here’s a quote: “The best time to start saving and investing for retirement has already passed. The next best time is today.” Really? Maybe it’s too late? Well, says Jonathan, yes, it takes years to achieve full financial freedom, but we can quickly escape a lot of financial worry. And that means that any saving at all is helpful. Don’t delay. Start today.

***

Now in that middle stage, the one starting in your 50s, said Jonathan, there are a couple of important things to focus on.

One is to pay off all your debt before you leave the workforce.

The other is your investment strategy. There’s a good reason, he reminded us, to follow a sort of investment glide path, in which we start off with a high exposure to growth-seeking assets, like equities, and gradually reduce that exposure to perhaps 50%-60% of our assets, by the time we reach Life Two. His explanation – totally accurate, of course – related to human capital that declines over time, in other words that fact that our future work earnings will shrink as our future work lifetime shrinks.

If you want a personal story that captures this well, let me again mention my book Life Two, and specifically Walk 20, called “Glide from youth into Life Two,” which brings the rationale for the investment glide path to life vividly, comparing a son’s investments with what happened to his parents.

Jonathan also had much wisdom to convey about the post-retirement stage.

One aspect was that the whole distinction between work and retirement needs to change. That’s not only social change, that’s change we need to apply to ourselves too.

Another was psychological. We give scant thought to using our free time. This won’t be a time of all golf or being at the beach every day. It’s important to find what will be fulfilling. Right on! We’ll spend some time on this, later in the series.

A third was financial. And, again, he had a most unusual perspective on this. Whatever you retire with – that’s what you’ll spend! In other words, you’ll adapt! Gosh, when you put it like that, it’s just common sense, isn’t it? It must surely be true. I’m so glad he put it that way. It’s heartening, I think! And I think it takes away a lot of the pressure we put on ourselves. Just do what you can.

He also had an insightful comment on longevity risk, after retirement, the fear that we’ll run out of money before we run out of breath. In surveys, it’s the biggest fear we have. And yet, ironically, retirees worry more about dying at an early age than about living to a ripe old age. We also reveal this illogical behavior when we elect a cash lump sum, even if we’re healthy, rather than a pension income stream. I hope we can expand on that one in a future episode.

In a great interview, what perhaps I liked best was when we put Jonathan on the spot at the end and asked him to summarize it all. I know that’s something I dread personally, it’s something I’m incapable of doing. But Jonathan came through beautifully.

Two things, he said.

First, finances. Keep it simple. Start young, save diligently, invest in market-tracking index funds, reach your 60s, with a fabulous amount of money, annuitize a portion of it.

And investing, quickly? Don’t worry about the short term, the market will be higher 30 years from now.

You know, if that’s all you remember, and that’s all you do – you’ll be on track for Life Two.

Bye!

***

Takeaway

Jonathan Clements has left a lot of wisdom behind. For example: Start saving young – put saving for retirement before your other financial goals. Saving is more important than optimizing your investment policy. Life is about more than money. Spend on experiences: experiences deliver pleasant memories; possessions deliver repair bills.

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