A Few Useful Finds for Life After Work — Issue #13

Hi from Stefan,

Welcome to the thirteenth issue of this biweekly newsletter.

Nothing here is sponsored or written for compensation.

Do You Know as Much About Personal Finance as These High-Schoolers?

This month’s WSJ financial quiz is from the National Personal Finance Challenge competition for high schoolers.

Those must be smart and learned high schoolers. This is one of the more challenging recent WSJ quizzes.

Optimizing vs. Satisficing

Morningstar’s Christine Benz makes the case for a ‘good enough’ portfolio. She calls herself a ‘satisficer’, a portmanteau from satisfying and sufficing. She argues that trying to optimize on, say, asset allocation can be time consuming while maximal outcomes are unattainable, since the future is unknowable.

She prefers making well-informed but simple choices. Fortunately, some choices, like indexing, are both simple and closer to optimal than known alternatives.

I also consider myself a satisficer. Though in contrast with Benz’s implication, I would assert that building a TIPS ladder isn’t just for optimizers—it can also be the simpler, “good enough” solution for retirees who value predictability over constant optimization.

Annuities?

I’ve been noticing a growing number of articles about 401(k) plans offering target-date funds that incorporate lifetime income annuities (here, here and here).

Whether these products ultimately prove successful or not, they reinforce the point that the retirement industry increasingly recognizes that the challenge is no longer simply accumulating wealth, but converting it into sustainable retirement income.

Many recent articles about 401(k) annuities focus primarily on the appeal of guaranteed lifetime income. Allan Roth offers a useful counterpoint in The Hidden Risks of ‘Income for Life’ in Target-Date Funds, where he discusses some of the trade-offs and argues that a TIPS ladder and delaying Social Security can serve many of the same goals without relying on an insurance product.

What I’m watching

Two great TV series from the early 2000s that I didn’t catch when they first ran — House, about the brilliant but deeply flawed MD diagnostician played by Hugh Laurie; and Gilmore Girls, about a precocious teenage girl in a small New England town, her wacky single mother, and wealthy and generous yet overbearing grandparents.

House is free with Amazon Prime. Gilmore Girls just left Netflix and can be purchased on Prime.

Warmly,
Stefan Sharkansky, PhD
Founder of The Best Third