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Weekend reading: Three graphs that boil down the retirement income conundrum

What caught my eye this week.

These three graphs from The Retirement Café [1] illustrate the case for a so-called ‘floor and upside’ approach to investing for an income in retirement.

Some people plan to have all their money at the mercy of the markets in retirement. They’ll then make systematic withdrawals, either by selling down capital, taking an income, or a mixture of both.

That’s a fine approach on paper – especially if you like an exciting read, because the fact is you don’t know how the story is going to end:

 

An alternative is to turn your entire pension pot into a certain income. This is the equivalent of what you used to have to do in the UK when you were compelled to buy an annuity:

The floor-and-upside approach always looks the most sensible blend to me – if you can afford it. Here you turn some of your funds into a guaranteed income, and invest the rest in volatile assets:

The lack of a scale on the first two graphs does flatter the cost of buying a secure ‘floor’, in terms of forgoing potentially superior returns. But that’s a minor gripe. Do read the whole article [1].

Remember that British retirees are entitled to a state pension, which provides some element of your secure income floor. See our previous articles on creating a secure retirement plan [2] and devising your income floor [3].

From Monevator

Types of investing risks – Monevator [4]

From the archive-ator: The time value of money – Monevator [5]

News

Note: Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber.1 [6]

Three million stock indices dwarf tally of quoted companies [Search result]FT [7]

Hammond calls for simpler inheritance tax [Search result]FT [8]

Number of millionaire households in UK surges to 3.6 million – ThisIsMoney [9]

Surprise rise in UK house prices as lack of homes for sale fuels lift… – Guardian [10]

…while UK mortgage lending falls to lowest level since January 2015… – Guardian [11]

…and interest-only borrowers are in denial, watchdog warns – ThisIsMoney [12]

What’s a Ping Pool? A VIP lounge for dark trading – Bloomberg [13]

Record number of Americans expect US stocks to rise – Tracy Alloway [14]

What hedge fund managers earn (on average) to lag (on average) the market – SumZero [15]

Products and services

Last chance to claim £1,100 Lifetime ISA bonus – Telegraph [16]

Are the days of the trust fund numbered? [Search result]FT [17]

M&S Bank launches top mortgages for first-time buyers – Telegraph [18]

Personal finance apps can’t automate adulthood [US apps but relevant]BuzzFeed [19]

Portfolio charts has been updated with new data for 2017 – Portfolio Charts [20]

Inside the bustling comic-con of ETFs [Podcast]Bloomberg [21]

Neil Woodford’s funds hit by exposure to Capita – ThisIsMoney [22]

Comment and opinion

Retirement strategies: Floor-and-upside [US but relevant]The Retirement Café [1]

It’s hard to predict how you’ll respond to risk – Morgan Housel [23]

Taxing issues – SexHealthMoneyDeath [24]

Can you really save for a deposit by ditching coffee and avocado toast? – Guardian [25]

Richard Beddard: The beauty of buy and build companies – Sharescope [26]

Larry Swedroe: Size premium persists – ETF.com [27]

From glass half-empty to half-full, but still no euphoria – Investing Caffeine [28]

Active risk: One fund’s 20-years of out-performance lost in four years – Servo Wealth [29]

Economic progress doesn’t equate to stock market returns – Morningstar [30]

Five lessons from semi-retirement – Humble Dollar [31]

Are company spin-offs worth a look? – The Value Perspective [32]

The best way to lose $5 billion – Of Dollars and Data [33]

Read this before joining as employee 1 to 20 at a startup – First Round [34]

Crypto corner

Bitcoin whipsaws investors as bubble shows signs of bursting – Bloomberg [35]

Bitcoin is the new gold, perhaps. But it will never be a currency – Bloomberg [36]

Brexit

Worse off under all scenarios after Brexit [Search result] – Government via leak via FT [37]

Credit BuzzFeed for the scoop – BuzzFeed [38]

Leaked Brexit impact report: key questions answered – Guardian [39]

How to make sense of those pesky Brexit forecasts – BBC [40]

Simon Jenkins: The brave Brexit speech Theresa May is afraid to give? Here it is – Guardian [41]

Off our beat

Fitness app discloses the location of secret military bases – TechCrunch [42]

You’re on the verge of losing everything – but you don’t understand why – BBC [43]

Deepfakes porn has serious consequences – BBC [44]

Grand Theft Life: Interview with Tim Urban [Podcast]Invest Like The Best [45]

Hardcore History Episode 61: Painfotainment [Podcast]Dan Carlin [46]

Working from home with pets [Silly pictures]Ask a Manager [47]

And finally…

“It’s easier to hold your principles 100% of the time than it is to hold them 98% of the time.”
– Clayton M. Christensen, How Will You Measure Your Life? [48]

Like these links? Subscribe [49] to get them every Friday!

  1. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [ [51]]