What caught my eye this week.
How are you feeling? Pretty comfortable? Enjoying the stock market recovery? Ready for a relaxing weekend?
Well I’m here like the Angel of Bad Breath to cause a stink with the following miserable graph, which comes courtesy of The Retirement Field Guide via Abnormal Returns:
The graph shows how after the age of 60, financial literacy decreases by about 1.5% a year.
As author Ashby Daniels says:
Nobody likes to think about getting older. Even less so, nobody likes to think about the decline of their mental health.
But the harsh truth is that as we get older, our cognitive abilities decline. This is especially true with regard to personal finances.
In an era when we’re being charged with taking control of our finances as never before – from how we save for retirement to how we invest our pensions – this seems to me a wrinkled grey elephant in the room.
Older and not wiser
Even worse of course is that we don’t want to admit to any decline. Just as we’re all better-than-average drivers, so we’re destined to believe we’re on top of our finances long after we’re not.
And let’s face it, older people aren’t exactly receptive to being reminded of these issues. My mother already thinks young people have it in for her generation by questioning its stance on Brexit.1 It’s easy to guess how they’d take to being told they don’t know best what to do with their own money.
I’m saying “they” but I appreciate not a few of you are in this older age group. Besides, I know what I’d say if confronted for the first time at 75 by someone saying they needed to take control of my investments (er, “f…lounce off!”) so we’re all in this together.
Clearly there needs to be more discussion – not least on our own site – as to how to guard against the potential downsides of poor decision-making in our later years. Children should be involved before they’re needed if they’re around, capable, and willing. If they’re not all three, there’s a role for trusted friends or professionals.
Many of us may aspire to remain mentally agile Warren Buffett types at 90 – that’s long been my goal – but it’s not in our gift to make it so, however many crosswords we do and new languages we try to learn.
“I’m mismanaging my own money”
Incidentally, this decline also has a potential impact on asset allocation decisions and other aspects of portfolio management that you rarely see referenced in the literature.
At the least it’s a tick in the box for underwriting your minimum income requirements with a simple annuity.
I also wonder if I should better incorporate it into my arsenal in my on-running guerrilla war against the “Screw income, total return is all that matters, sell capital each year!” passive orthodoxy.2
I’ve noted in previous skirmishes that calculating how much to withdraw and selling down your capital each year might seem a fine plan at 45, but it could be terrifying prospect for a mentally slipping and frightened 80-year old.
Monevator contributor The Greybeard has pondered this quandary, too.
Perhaps relying on a portfolio of income generating funds dumping cash into a current account (i.e. not even bucketing) would also be beyond me in that state but it seems intuitively to be a lower hurdle.
Again, what a shame (most) financial professionals don’t have the same reputation as say doctors. There’s an obvious need here. But not an all-encompassing obvious solution.
Enjoy the weekend, whatever age you are!
*A drag on your returns. Geddit grandpa? What, you’re only 26? Oh, it’s sort of a pun.
p.s. I’ve closed the poll in our great debate about whether to include your house in your net worth number. In the end 54% of you voted yes and 46% said no, with nearly 1,200 readers voting. The comments on that article were excellent, too – well worth a read if you’ve only seen the post over email. Thanks to everyone who chipped in!
From Monevator
Possibly more than you ever wanted to know about bond index funds – Monevator
We updated our broker table, and there’s a couple of new entries – Monevator
From the archive-ator: Gold as an asset class – Monevator
News
Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!3
Did grandad have it easier? FCA to study financial divergences between generations – FCA
Bank of England raises growth forecast; warns more rate rises probably needed – BBC
Fresh HMRC tax crackdown on freelance contractors [Search result] – FT
First-time buyers benefit from weak house price growth – Guardian
Millionaires flee the politics of their homelands [3,000 left Britain last year] – Bloomberg
UK call centre to trial four-day week for hundreds of staff – Guardian
The world’s richest institutional investors, ranked – Institutional Investor
Universal credit regulations ruled unlawful by High Court – Guardian
There’s a premium nowadays on professionals who’ll be available 24/7 – New York Times
Products and services
Equity release: how to squeeze money out of your home [Search result] – FT
Future of 1p and 2p coins secured ‘for years to come’ – BBC
Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter
Track your portfolio with Rebo [In Beta, the creation of a UK money blogger] – Liberate Life
Checking out the UK’s first till-free grocery store [Search result] – FT
Out of the ordinary houses for sale [Gallery] – Guardian
The inside story of Amazon Prime – Vox
Comment and opinion
Wrong approach – Humble Dollar
Lars Kroijer interviewed by Meaningful Money on how to invest [Video] – via YouTube
Is ‘direct indexing’ set to disrupt the ETF market? – Wealth Management
How to invest given that investing is a commodity – Bone Fide Wealth
Useful and overlooked skills – Morgan Housel
Should we tax frequent flyers more heavily? – Simon Lambert
Becoming a financial advisor could be a great career move for will-be mums – The Belle Curve
Are investors paying lower – or just different – fees? – Morningstar
Psst! Wanna buy a wind farm? – DIY Investor (UK)
Glass half-empty becomes glass half-full – Investing Caffeine
Brexit
Brexit has drained £30bn from UK-domiciled funds, says Morningstar – Investment Week
The local elections looked like a kick against Leaving, but media not sure – via Twitter
Theresa May also claims people voting for non-Brexit parties is a mandate for Brexit – BBC
Remain Voter website aims to help Remainers vote tactically in Euro elections – Remain Voter
Get Voting app should get you on the electoral roll with minimum fuss – Get Voting
Buy a £1.7m villa in Cyprus and qualify for a Golden Visa to stay an EU citizen – ThisIsMoney
Kindle book bargains
So Good They Can’t Ignore You by Cal Newport – £0.99 on Kindle
Nudge: Improving Decisions About Health, Wealth and Happiness by Richard Thaler – £1.99 on Kindle
Zero to One: Notes on Startups by Blake Masters and Peter Thiel – £1.99 on Kindle
The Personal MBA: A World Class Business Education in a Single Volume by Josh Kaufman – £1.99 on Kindle
Off our beat
The minimizing coin – Seth Godin
The gambler who cracked the horse race betting code – Bloomberg
The $70bn quest for a good night’s sleep – Fast Company
The story of London’s tech start-up scene, as told by those who built it – Wired
Fancy graphs showing how the world’s population is changing – Visual Capitalist
She was “the queen of the mommy bloggers”. Then her life fell apart – Vox
The errors that I don’t see – Of Dollars and Data
Turns out coffee pod machines are [sort of] good for the environment – Wired
Let sleeping co-workers lie – Slate
How Uber changed Silicon Valley [Search result] – FT
Scientists find cocaine in river shrimps in Suffolk – BBC
And finally…
“When I was a kid my father told me there were two kinds of people in the world: smart people and wise people. Smart people learn from their mistakes. Wise people learn from somebody else’s mistakes.”
Brendan Moynihan, What I Learned Losing A Million Dollars
Like these links? Subscribe to get them every Friday!
- No, not every young person. No, not every old person. But a valid generalisation. See: https://twitter.com/SkyData/status/746700869656256512 [↩]
- Which includes my own co-blogger, who I have immense respect for so obviously I’m teasing a bit with my language here. Also as I’ve said many times, living off income is a richer retiree’s game, and it leaves a lot of cash on the table when you die. [↩]
- 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”. [↩]
Is it actually mental acuity going down as we age, or is it younger people tending to be ‘cleverer’?
IQ rates tend to increase amongst younger generations, so older peoples IQ trends down as it’s rebased. I believe a favoured tactic of death row lawyers is to get marginal inmates retested, as the punishment isn’t given below a certain IQ threshold.
Or we could just be observing the lack of ‘interesting’ investments around in the 1960s compared to now.
….. and declining ‘literacy’ (financial or otherwise) is not the same as declining ‘cognition’. Financial literacy could be declining for reasons other than (or as well as) cognitive decline.
“Did grandad have it easier?”: some of us had granddads who were of an age to fight at Passchendaele. Money isn’t everything.
“There’s a premium nowadays on professionals who’ll be available 24/7”: which must usually exclude mothers of small fry.
This is a remark, not a complaint. Reality iswotitis.
“one of the biggest risks of investing: underperforming the stock market”: that’s not a risk for me at all.
Losing income as measured against inflation – that’s a risk. Losing capital such that we feel our security has been compromised – that’s a risk. But underperforming the market? Phooey!
@dearieme — It’s an FCA study, and it’s about finances. Somehow I think they’ll be skipping lightly over any cohort of 120-year old WW1 veterans still somehow out there!
Let me post about Brexit. pppplllllleeeeeeeaasssssseeeee!
I find this incredulous (BBC Link above, but same soundbites applied in Telegraph, Independent, Guardian)
“Theresa May also claims people voting for non-Brexit parties is a mandate for Brexit”
How exactly? Please educate me. If your vote swings in an area to LD or Green how is that a Brexit vote?
I woke up this morning with about 300 Tory councillors lost and all I could hear on the news was this theme from MPs that Brexit needs to be more Brexity. Either they or I (or I suppose both) have clearly lost the plot.
This evening I was reading Theresa May’s script from Wales and Scotland meetings. Clearly the same script with a stronger emphasis on Labour losing Councillors than the magnitude of 13 that Torys lost.
Politics is a strange game because no-one tells the truth, but I think (hope) the electorate are now becoming wiser to it. It would be so refreshing for a party that was called, perhaps, “The Truthful Party” 🙂
@marked — My ultra-Remainy *cough* metropolitan elite friends have been ranting away for 18 months about a pro-Leave BBC bias. I’ve constantly pushed back, pointing out that outside of our own bubble Leavers claim the media has a pro-Remain bias, including the BBC. But I have to agree this spin today has left me incredulous. There may be deep data that backs up what they’re saying (e.g. where the swings occurred) but if so they’re keeping it a secret. Lib Dems won seats in South Somerset FFS — that’s Jacob Rees-Mogg’s constituency!
I expect May to continue her death march, it’s abundantly clear she’s the most one-track actor since King a-the Nerth Jon Snow. But the BBC and the wider media?
@TI
Yes JRM’s territory – a remain territory from the referendum. Similarly Steve Baker’s territory was remain in the referendum.
You just can’t make it up.
Honestly though, I think the ERG have been hiding in the Conservatives waiting for a viable party elsewhere that has the same mood music. Perhaps “the Brexit Party” will be their stable at the next General Election. Of course JRM and Steve Baker would lose their seats then.
Mark Francois can then dream of becoming Defence Secretary rather than being passed over!
The question of BBC bias either one way or the other intrigues me. I think generally what people mean when they say that the BBC is biased this way or that way is that it does not accurately reflect our own views of external events. Naturally, we all have different perspectives on every issue, and therefore we all have different ideas on where the ‘golden mean’ of impartiality should sit.
I wonder if there is any way of empirically testing whether the BBC is bias or not? Question time released an infographic outlining the 5 individuals who have made the most appearances, and 4/5 are remainers, with Charles Kennedy having passed away before the referendum (although all indications are that he would have voted remain also). Of course, Question time is just a small component of the BBC, so this is not conclusive of anything.
Also, I do not think it is wise to draw too much from the local elections given that the voter turnout generally maxes out at 35% (if lucky) of the available electorate. I do believe that resistance to Brexit would have played some part in some areas, but I feel this is just one of many factors. The Liberal Democrats have always tended to do better in local elections due to very capable grass-roots campaigning on local issues, and they usually tend to do better when disillusionment with the main political parties is high. It is also true that the constituents who were most likely to vote leave and those who are equally less likely to vote in local elections.
Thanks for the links as always!
Brexit, stop reading if you have just had enough… At this moment in time, I am left wondering just how the European elections will go. 8700 Euros a month and a great pension will not attract many career politician when the odds of collecting a wage for any length of time are so in the balance.
The thing that worries me is the slew of data that will be spun endlessly in the U.K. when the results are in.
Ask any man in the pub to name the actors that are pro Brexit and the usual suspects are rhymed off, Boris, Mogg, ERG, Gove, May, Farage, Corbin… All the prior have massive exposure in the press and on the telly (so I’m told, haven’t watched it in years so can’t verify)
Ask any man in the pub who the actors are for Remain… (silence)
Now the pubs I frequent are in an idyllic country setting with a bias towards Brexit and sheep farming, which don’t appear to be mutually exclusive somehow although no one has explained how to me yet.
This may give me a bias, I would be interested to hear if London pubs are full of talk about Dominic Grieve et al?
My point is, who will the (at the last count) 48% rally behind? where is the representation? why are we not hearing about it if it even exists? and can any data that will be used and spun ad infinitum after a vote be anyhow indicative of the outcome of a confirmatory or second referendum if that even happens? (place your bets)
Dare anybody voice that we have all been dancing this dance for too long and that an end to it, either way is the only solution and it needs fixing fast before we lose a generation of investment and growth in this country. I look forward to the day I have no opinion about Brexit.
@Sam
“It is also true that the constituents who were most likely to vote leave *and* those who are equally less likely to vote in local elections.”
I take it you mean ‘are’ here?
That being so, I’m not sure I agree.
If Brexiters don’t want to be in Europe, then surely they prefer some smaller political unit. Surely that would make them more likely to vote in local elections?
I’m not sure what proportion of seats actually had a ‘leave candidate’ options. In my area (heavily remain), the only candidates were Conservative, Labour, Lib-Dem, Green – so who would a leaver vote for?
A useful reminder about looking towards advancing age. Interests and priorities change as you get older. When I looked at a biochemistry text book this week I remembered how, 40 years ago, that detailed stuff was riveting! Now I would rather be outside with the living things it creates.
I recently hit 64 and I realized that I would rather be in the sunshine (or rain) than sitting at my financial spreadsheets. So I am slowly simplifying things.
There’s a smashing world out there. And lots of interesting, complex things to become involved with. That’s what all this saving is for!
By the way, love Monevator (and Europe). You have my vote!
73 and Children (3) have all my financial info
One married to a Banker has the actual figures
None expressing much interest or wish to discuss it
I update them every 2 or 3 years
Portfolio simplified down to 2 SIPPS and 2 ISAs
3 Index linked funds only -KISS!
Staying sharp so far or is that an illusion!
Monevator keeps me up to the mark every Sat
If I start to lose interest in this Board that will be my marker of oncoming cognitive failure
Will I realise it as it happens?
xxd09
PS re Brexit
Now that’s a subject that keeps my brain in gear!
To watch the two sides of the argument go hammer and tongs at each other is very entertaining for an old codger
Cannot get too excited either way as long as we all have shoes on our feet,a roof over our heads.a wide screen TV in every house and full bellies
There seems to be a full on existential crisis in the populace-cause?
Life has been historically a lot worse
Someday they will need to talk to each other and compromise and do a deal
Our current leaders are obviously not credible
A Farage/Trump moment approaches if no resolution occurs
And so on and so on……….
xxd09
@ben
Thanks for the correction, typo!
I meant more in the sense that the local elections are generally the reserve of those who are actively interested in politics and have strong record of voting in previous elections. Many leave voters are those who had rarely voted before and did not have a huge interest in politics, therefore making it more likely that they will not vote in these local elections.
In essence, my main point is that given the average turnout for these local elections was probably around 30%, anyone trying to draw too much from it regarding the ‘mood of the country’ is likely to be engaging in a blind folly. In fact, I saw one tweet which exclaimed that these election results were evidence that not leaving the EU was now the ‘will of the people’ (a stupid phrase in any case, imo). No doubt this same person would have claimed that the EU referendum, with a much larger turnout, could not be taken as evidence of the will of the people.
I was fascinated by the “financial literacy decreases by about 1.5% a year.” stuff. I mean good god at my age how long can it be before I accidentally decide that pork belly futures are the route to a safe retirement, or get scammed into transferring all my cash to a helpful person who calls up pretending to be my bank in a reverse Nigerian Prince.
So I clicked through to the original paper and looked at what they had done. The first point to make is that it does not appear to be a longitudinal study, but a cohort study. That is, in this group of people of many different ages who took a set of tests at a point in time older people did worse, but there is no evidence that any individual got worse as they aged. They did their best to allow for group differences like level of education, but it is difficult.
Since cognitive function does generally trend down for an individual it seems reasonable that we would get worse at financial decision making, particularly if being pushed to do it at speed. So, I think the general point is OK, but some of the specifics quoted are weird.
For example, they state that people over 75 are much less likely to understand the value of diversification. But for me to suddenly wake up and say “why the hell am I invested in all these asset classes?”, would require me to forget completely why I did it twenty years ago. With dementia that can happen, but if it did I would be in much bigger trouble than managing my investment portfolio. A good reason to set up LPA’s and give your attorney guidance on your wishes before it becomes necessary.
One factor that I did not find they had controlled for was the changing nature of the economy and individual financial responsibility. The older cohorts may not have had to deal with pension freedoms and individual pension responsibility. Many over 75’s probably don’t get the gig economy, zero-hour contracts and side-hustles either. They never needed to.
Certainly my parents looked at people with ZHC and asked “why don’t they get a proper job?” in genuine puzzlement. They never saved or invested for their retirement, but they never opted out of any company pension scheme that was going and trusted that it would be all right. It wasn’t great, but it was OK. People working today have many more financial decisions to make than my parents did.
My own strategy has been the floor and upside approach recommended by @TA (https://monevator.com/the-most-important-goal-for-every-retiree/) helped by a couple of defined benefit pensions. I am also in the throes of getting lasting power of attorney sorted out for both health and financial matters. Late, but at least I am doing it. My mother still won’t consider it.
So I would encourage more discussion of handling ageing for the financially literate/interested. I can see myself getting bored with all the fun stuff on asset allocation, risk profiles and chicken entrail examination. I would like to create a version of the Slow and Steady portfolio that runs completely automatically, throws off income streams that match my requirements and could be easily handled if necessary by my attorney. I think Warren Buffet had some thought on that.
‘calculating how much to withdraw and selling down your capital each year might seem a fine plan at 45, but it could be terrifying prospect for a mentally slipping and frightened 80-year old.’
Too true. I can’t sort it now and I am ‘ only’ 65 :). There is also the risk of being scammed and emotional pressure from family to divest in their favour.
On the local elections, it is hard to interpret the result. The EU elections, if they happen, will be clearer. I would hazard the Labour lost votes ( or were ignored by the swing voters) in the north by disgruntled brexiteers, and in the South by disgruntled remainers. The Conservative losses were by disgruntled everybody but the swing from them to the LibDems and Greens must surely be a measure of the remainers discontent – Conservative Brexiteers had a difficult job finding an alternative but it wouldnt be either of them.
@Algernond.
Conservatives and Labour both state that they are committed to delivering Brexit, Green and Lib Dem to remaining in the EU. Seems simple to me.
Of course, the problem many leavers have is that the specific version of Brexit they thought they were promised doesn’t seem to be on offer from any of the parties. That is a problem with the way teh referendum campaigns were run, not with the commitment to leave or remain of the main parties in the local elections.
@old_eyes – yep. Thing is, in many areas, there is no protest-vote option for leavers. As the protest-vote options are Lib-Dem or Green…
I came across this article which I thought you might find interesting:
“How YouTube Is Shaping the Future of Work”
https://daily.jstor.org/how-youtube-is-shaping-the-future-of-work/
“Americans tend to expect our jobs to provide us with not just money but fulfillment, to offer a chance for creativity, purpose, and contribution to our communities.
That’s the promise that YouTube represents to many people, a way to do the thing that means the most to them and turn it into a career. If that doesn’t work out—and, for most people, it doesn’t—that feels like failure. But maybe it’s really a sign that we’re living in a culture that expects far too much from work.”
When I was young, I might have understood this article…
When TI gets out of his pyjamas he may come and shout at us for drifting into politics but Rees-Mogg has written with unusual clarity from the leave side
https://www.telegraph.co.uk/politics/2019/05/03/disastrous-local-elections-could-blessing-disguise-conservatives/
(Paywall).
Back to topic, the tax management side of things will also be a continuous responsibility throughout drawdown. As of now, I have a negative tax code which I understand and can unwind. Not clear I will always be able to. Then, of course, there is the prospect of future changes to the pension and tax regime which have to be monitored.
@MrOptimistic & Algernond
Is Ukip not the Brexiteer protest vote? They didn’t exactly do well.
The best Brexiteer argument for the outcome I can see is that Brexiteers feel they have ‘won’, so don’t need to vote on the basis of that. Whereas Tory Remainers are deserting to make their point.
That doesn’t seem convincing to me though.
Oh no, monevator, your sounding old NOW!
state pension and annuity then if you start to decline and have done with it.
@Ben. No, I dont think so. It would have been in its 2016 garb but now most traditional conservative voters would consider it toxic I reckon and hope. For full disclosure I have never voted Labour in my life: until Thursday. A couple of local issues and the desire to throw a brick through somebody’s window got the better of me :O. Ukip had a candidate but there are limits. The incumbent still got in sadly. Farages outfit is fine tuned and well targeted, well for now.
On a technicality Jacob Rees-Mogg’s patch is North East Somerset. Some parts of that are achingly beautiful and include the third largest prehistoric stone circle in the UK, Stanton Drew, but some of the towns are where hope goes to die. Seems well-heeled in general according to wikipedia
It still went Lib Dem I am pleased to say 😉
And thanks for the Vote Remain link. I have never been so pleased to receive a EU Parliament voting paper. Joni Mitchell was right in that song about you don’t know what you’ve got till it’s gone.
@MrOptimistic
I confess I haven’t really kept track of Ukip.
Well the turnout wasn’t really down, which suggests either Tories were switching votes, or Tories were staying home whilst Remainers went out voting.
I suppose the votes could show up in spoilt ballots and independents, they could go either way though. There are people that wouldn’t vote Lib Dem after their stint in govt, and if the greens aren’t standing….
@old_eyes — Thoughtful comments as ever. I agree there would seem to be a big difference between intellectual capacity and ‘financial literacy’. As a parallel there are Oxbridge dons in their 70s who are still barely on email, but who are still with it cognitively. They’d failed a ‘digital literacy’ test hands-down… But perhaps it’s semantics, and three cheers for you for actually going back and reading the paper, which is a tad reassuring.
I suppose we might still ask how do we best remain financially ‘literate’? Besides reading Monevator (thank you xxd09! 🙂 ) my belief is trying to have young people in your life, or at least not dismissing their ideas, helps. As someone without kids whose next generation family are hundreds of miles away in Brexit-land, one way I try to do this is via my start-up adventures, which are 90% young people with bright ideas. Multiple times I’ve been surprised by just how far along they are (as a trivial point virtually none use cash now. I mean *never*) and it’s been a kick for me to at least learn more about what they’re doing, if not belatedly get on board. (E.g. Digital spending apps like Monzo and Dozens).
The discussion we had on WR last week about Monzo’s premium card offering is a good example. Talking and watching 20-somethings in action, it’s not half as inexplicable an offer to me as it clearly was to some Monevator readers, or would be to me if I only hung out with friends my own age. (The trick after that is not to go “yes, I understand why they do the stupid/pointless things they do”, which I’m not sure is really enlightenment as such! Rather to properly understand/respect that millions of people don’t start doing something for no good reason. Previous generations thought cash machines and mobile phones ridiculous.)
It reminds me of a similar conversation I have with university friends about technology. We’re all frustrated with our oldest relatives, and their inability to, for instance, ‘parse’ a web page. After 20 years of mainstream Internet, surely there’s no excuse? Many of my friends believe this, and claim they will always be on top of technology when they’re old.
Yet quiz them and they don’t use social media, they don’t post pictures of their brunch on Instagram, they don’t use Apple Pay. It’s not so much the technology that’s hard to understand/stay up with, it’s the mechanics and social norms of using it. 🙂
Ramble over. 😉
@MrOptimistic — Well, I made a throwaway Brexit comment in my initial article so by my own (loose) rules I started it… 😉
@Ermine
“third largest prehistoric stone circle in the UK”
I’ve heard JRM called many things…. What are the 2 bigger ‘circles’? BoJo and Mark Francois?
@Ben I suspect that after 5000 years there won’t be anything of JRM still extant. Even Bojo’s narcissistic personality might have faded to random background noise by 7019 😉
get you on the electoral role — ROLL
Great graph but it’s worth remembering that there is always more difference within groups than between groups (or cohorts).
On the drawdown and how to arrange income as one ages, no particular plan can work !
I have ISA’s and a modest SIPP and a taxable account and add to the ISA’ s at the Max level and SIPP at the £2,880 max for both myself and my wife.
Reinvesting ISA and SIPP dividends to maximise tax sheltered funds. Without any pension income and using a taxable equity ‘pot’ the plan is to live off this and fund the tax exempt accounts for as long as possible before drawing income from the tax sheltered accounts.
This is unintentionally living off total return rather than just dividends etc.
In 2013 I expected to have pretty well have exhausted the taxable portfolio by 2020, to my surprise, reasonable market returns have left us with around 75% of this taxable portfolio remaining. Given that the portfolio is balanced on an overall allocation, rather than by the actual accounts they are in, it rather suggests that the haphazard do nothing approach has some legs and maybe a slightly chaotic old age may work better than might be expected !
The only policy with the taxable portfolio is spend the income and maximise the CGT allowance, sales proceeds funding lifestyle and investments in tax sheltered accounts.
If cognitive decline comes later in life, then this suggests to me that just selling bits if required and spending dividends would be ‘good enough ‘ if the original portfolio is reasonably diversified in the first place to run on auto pilot.
Looking forward to more articles on this subject as this is particularly relevant for me. The idea of simplifying my investments as I get older is something I have been thinking about recently. Probably see myself managing my funds for a few more years yet but will probably consider dropping most of my funds into a Vanguard Retirement Fund at some point.
“our oldest relatives, and their inability to, for instance, ‘parse’ a web page.”
What does that mean? Why is a web page harder to parse than any other sample of English?
My parents started poor and ended well off not through high income but frugality and attention to detail. Dad locked himself in the dining room for 2 days to do Mum’s tax refund application each year. When he died they had 70 different accounts, but they weren’t optimised, just left to run on as state and civil service pensions were enough. Probate thinned them, but more have come over the last 7 years. Mum is mentally sharp, and financially aware, but as she approaches 90, has no computer skills at all, hates forms and struggles with call centres as she can’t hear the people or understand their terminology. She really needs me to interface with authority over tax, and utilities. She records every dividend in her “book of words”, but will never sell anything, so she pays too much in fees. It’s all rather a muddle, and it’s just as well she won the investment game, and doesn’t need to worry. Having enough money for a nice care home is more important than IHT planning.
My lessons from this are that smart people become disengaged from the modern world, need plenty of money as they can’t optimise any more, and need an advocate from a younger generation. There is reason why I’m funding my nephews’ LISAs invested in index trackers. I want them to be financially literate and be my advocates 30 years from now, as they love generous uncle John.
@dearime
Websites have a design ‘language’ distinct from books, newspapers or other computer applications.
Eg some text is clickable, without any apparent hint that it could be. Theres the layout, menu bar at the top, but then the ‘burger’ menu button for everything else, except the contact link 9 times out of 10 is down at the bottom. Then there’s things like identifying where you can scroll, which button to actually advance, how to get to the previous page, and theres nomenclature. What proportion of over 60s think I’m talking about Wimpys when I talk about burger menus?
That’s what I took it to mean anyway.
Obviously if you point to a string of text on a web page and ask them to read those words, it’s the same. But there’s a whole layering of information — and as @Ben says a bunch of standard elements — that direct the order in which the words on a web page are to be read, have meaning depending on where they are placed (e.g. menu elements versus sidebar elements versus headings), and that sometimes are inherent to the page and sometimes from third-parties (e.g. text box ads in the same format as the site copy, albeit perhaps in a small box or similar).
Web natives and those that got on long ago/early enough zip through all this naturally, to a greater or lesser extent. People over 60 generally do not. In many cases obviously they can/have learned to read web pages, but even then most of them don’t click around as fast or naturally. They’ll linger, stare for a bit, then ‘plump’ for a click.
A really simple example is all pages in books are read top left to bottom right (in English) and even magazines tend to follow this format so you if you ask an older web-insecure person to “just click the contact form” they will automatically start scanning from the top left, even if it’s a banner ad.
They often say things like “my website says I need to download a browser because I have a virus” and it’s really an advert. I’ve heard this sort of thing from many individual old people. Older people click ads at a higher rate for the same reason.
There’s lots of evidence on this anyway, it’s not just my theory/observation.
The bigger point is 20/30/40-somethings can’t be smug. Try navigating Snapchat or 4Chan or even understanding the lingo of the comments on Instagram if you’re not familiar with it. In the future augmented-reality and the like will be upsetting the apple cart too.
@ben oh dear, I’m 52 and on the web all the time, but still had never heard of a ‘burger menu’ (and have no idea what you mean)
I have to say I’m not convinced that younger people will be able to navigate everything online as they get older. For one thing, tech will move on and their habits and familiarity will be locked into the stuff they grew up with, much like older generations currently.
Secondly, it is just more complicated to have to remember passwords and websites for everything. When you get really old you can’t even be bothered remembering where all the accounts are, let alone how to access them.
@johnb your mum’s situation raised a wry smile. It took me literally years to track down all my parents accounts (while one was still living!). I was very pleased with my end result of one current account, one cash savings account and one investment ISA account containing one fund. Like yours, my parents ended life with excess income and enormous amounts of untouched savings, from a lifetime of modest/frugal living plus the luck of their generation’s pension lottery.
@Vanguardfan — You’ll have used lots of ‘burger menus’. It’s where you see a stack of lines, and you click on it and you get a drop down of menu options, to navigate around the page. Incidentally I’m not sure if you were replying (/’retorting’ 😉 ) to me or continuing the thread, but perhaps I wasn’t clear that I don’t think young people have been gifted the keys to the digital understanding kingdom either. 🙂 (Hence my comments about Snapchat and Instagram etc). This stuff moves on, as well as I agree their ability to remember stuff diminishing. (Technology doens’t help. It’s taken me 15+ years to remember my mobile number, because there’s almost never a need, whereas I still remember the family phone number I answered as a six-year old.)
@Vanguardfan
Don’t worry about it, I’m supposedly a ‘millennial’, but half of my examples are things I’ve had trouble with.
Burger menus are the little icon with 3 horizontal lines, I think they started off on mobile phone apps where every piece of usability be hidden lest the software become usable. You’ll find them on hipster web sites, not upstanding websites of record like Monevator ( don’t look up the top where they’ve helpfully labelled it ‘menu’, kind of missing the point of icons 🙂 )
@Ben — I’m afraid to report that our theme is responsive, so if you shrink the window down eventually the menu collapses and you’ll see an example of burger-menu-dom in action top right… 🙂
@TI
I know, my attempt at humour obviously didn’t come across very well.
LPAs have been mentioned here – tick.
I don’t think making a Will if you haven’t already done so, and keeping it and your executor(s) scrupulously up to date have – X.
Also, at a basic “bricks and mortar” level, if you live alone make sure that a trusted relative or friend knows the location of your safely hidden outside “oops I’ve locked myself out/lost my key” emergency key, and that they will be systematically alerted to any situation affecting you requiring the involvement of the emergency services and their possible entry to your property.
@ben, TI – thanks for the explanation -now I know what a ‘burger menu’ is I’m seeing the darn things everywhere! Who knew they had a special name? (well clearly everyone except me).
@TI not replying or retorting – just commenting on what seems to be a widespread idea that digital exclusion/confusion is specific to this particular cohort of old people (non digital natives) . So I’m agreeing with you 😉
While we’re on the subject of LPAs, don’t forget that anyone who applied for an LPA between April 2013 and March 2017 is due a partial refund. You need to apply via https://www.gov.uk/power-of-attorney-refund.
Thanks, Ben. I see now that the writer didn’t mean parse so he put inverted commas around the word as a way of advertising to the reader that he couldn’t be bothered to explain himself.
You, on the other hand, were kind enough to attempt an explanation.
Since you know about these things, can you tell me if there exists a short explanation of why the Search function on most websites is such rubbish?
@dearime
I think you’re being unduly harsh, the inverted commas indicate a somewhat non standard usage as parsing usually refers to something purely textual.
Google gives the definition:
parse
/pɑːz/
verb
resolve (a sentence) into its component parts and describe their syntactic roles.
Is it not reasonable to resolve (a web page) into it’s component parts?
Re search.
If I search for ‘fruit’ on Sainsbury’s website it will blindly give me any product containing that word. So rather than giving me apples and oranges and such, I get fruit salad (sweets), or fruitilicious shampoo or fruit of the loom t shirts. Now matching text strings is easy, you don’t need to know anything about the products, no human intervention needed.
To start matching fruit with apples and oranges, you have to understand what a fruit is, and that apples and oranges are fruits. That starts getting difficult fast, because that’s a human judgement, so you need someone to categorise everything. That takes man hours and lots of computing power.
That’s probably why you think search is rubbish, it makes no attempt to understand what you want, it just blindly gives you the best textual matches.
@dearieme, rubbish search functions. Ben can reply with a more expert answer, but in the meantime from a combination of experience and intuition, I think in most cases it comes down to the website administrators and developers not tagging the resulting web page with the correct combination of words and phrases likely to be entered by the user.
It takes time and effort and some intuition to second guess what people may enter in order to search for a specific item or area of information, and to do it properly results in a good long list of key words and phrases to tag as triggers to return that page as a result. You really need to include misspellings and related words too.
Most website owners don’t bother, and searches are, as you say, rubbish.
One of the things that put Google where it is now is that its people really understood and refined these techniques to improve their search results.
Hi, bit of a request for help. I’ve been asked my several Muslim colleagues about halal investing. As you guys all know , as you know everything about investing what are the low fee options.
Also, I’m ashamed to admit , I have some vegan friends too.
I eat meat, drink milk and love a tracker fund !
What can my halal and vegan friends invest in. I know Aberdeen has an option. Please feel free to recommend an article you have already produced on this topic.
To be honest, I’ve told them to ask the scholars. But I have few ethnic European friends. And vegans don’t like to think they filled “scholars” please help
@dearieme writes:
The writer has posted as of this one 4,093 comments on this website, most in response to queries, and written well over a million words in articles bothering to explain himself.
You on the other hand have just griped and moaned for more than five years.
I went through a period deleting your grumpy comments in the past, then relented when I decided perhaps you and @neverland had a role as some sort of vaccination.
Revisiting that decision now.
p.s. My comment previous comment was in fact an explanation/response to your query! It’s was half a dozen comments before your latest grumping. But perhaps you’re having trouble parsing etc.