Happiness is a spiky retirement spending plan

Weekend reading: Happiness is a spiky retirement spending plan post image

Good reads from around the Web.

I dread to think how many articles I’ve read about retirement spending over the years. Especially as I’m not even personally super-interested in the subject.

I’m certainly not like my co-blogger, who is constantly tweaking his parameters like a SETI researcher who thinks he might just have made first contact but is worried he could have just discovered a bird nesting in his satellite dish.

Many readers also seem to be searching for their perfect numbers, via spreadsheets, the latest safe withdrawal rate estimates, and micro-projections about their portfolio’s future returns.

I simply aim to have enough money to live off the income, whatever it may be, and to cut my cloth accordingly.

I appreciate though that this is a lofty goal for anyone who isn’t an investing fanatic with knowingly Spartan tastes and no spouse or kids (and a quixotic one, given that lack of heirs) and so I am forever reading articles on the pros and cons of this or that withdrawal method, especially when compiling these links.

Every week I come across at least a couple of takes on the subject – old news for most of us, but potentially an eye-opener for someone new to sorting out their finances. Each piece has to go through the sniff test.

All of which is a long-winded way of saying I actually read something a bit different this week in a Wall Street Journal article about the same old subject.

The author, Dr Shlomo Benartzi, is a professor at UCLA specializing in behavioural finance. The article is about how to maximize happiness in your retirement spending, rather than simply how to stretch it as far as possible.

The whole piece is worth a quick skim even if you think you’ve read it all before, but the idea I found most interesting was to include deliberate “spikes” in how you dole out your retirement dosh.

Informed by the way a kid enjoys chocolates as a treat but would grow bored if it was on the menu three times a day, the author suggests that in retirement:

…instead of gorging on candy, people would receive larger sums of money at various intervals, before resuming their regular payment schedule.

For instance, clients might enjoy a “luxury summer,” featuring higher levels of spending that allow them to travel around the world first class.

Although very few financial plans offer such a feature, people seem to know they’d like it. According to a survey by researchers at Harvard Business School, a majority of people want a retirement distribution featuring a “bonus month” every year.

This method provides an important psychological benefit. Because the higher drawdowns are a special treat, we never adapt to the elevated level of consumption.

The luxury summer feels like a special reward.

It’s a novel idea that would surely liven things up, if you can afford to include it in your plans.

Have you any other ideas about how to make your retirement spending more than just one long slog of spending money month in, month out?

Let us know in the comments below!

From the blogs

Making good use of the things that we find…

Passive investing

Active investing

Other articles

Product of the week: The new iPhone 7 is getting great reviews, not least because it doesn’t occasionally burst into flames like a certain rival. ThisIsMoney reviews the cheapest ways to buy Apple’s new handset, and also where to sell your old one. I’m still living with an iPhone 4, so I think it might be time for me to make the leap. Being an Apple fanboy (and shareholder) I’m tempted to go down the new Apple financing route. (The offer comes with AppleCare+ included, and after 15 years without any mobile phone insurance my number must nearly be up…)

Mainstream media money

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 of that site.1

Passive investing

  • The most important investment decision you’ll make – Forbes
  • Why choose currency hedged bond ETFs? [US but relevant]ETF.com
  • The professor who was right about index funds all along – Bloomberg

Active investing

  • Hedge fund son thought hedge fund dad’s trades were fishy – Bloomberg
  • Are oil stocks good value? [Search result]FT
  • Property funds back in business after closures – Guardian
  • What single country ETFs are doing best this year? – ETF.com
  • What should you buy instead of expensive government bonds? – ThisIsMoney
  • The analyst serving the 0.01% on Wall Street – Bloomberg
  • Banks have a dubious business model and markets have noticed [Search result]FT

A word from a broker

Other stuff worth reading

  • Fund managers are the budget airlines of finance [Search result]FT
  • Low rates are pushing the next rung on the ladder away – ThisIsMoney
  • A pension is for life – however long it lasts [Search result]FT
  • The low rate world – The Economist
  • Why I’m making loans to PC World [Search result]FT
  • LSE boss claims 100,000 jobs could go with Euro clearing – ThisIsMoney
  • How to live The Good Life without giving up the rat race – Guardian
  • The difference between rationality and intelligence – New York Times
  • Want to age well? How about you never retire? [Couple of weeks old]BBC
  • I used to be a human being [On detoxing from the Internet]NY Mag

(Free) (e)book of the week: If you’re an active investor and you’ve been a Monevator reader for any length of time, you’ll have come across John Kingham’s UK Value Investor website. [Or at least you should have. If not then you and I need to have words. I link to John’s blog here almost every week! I haven’t been missing whoever they replaced John Peel with on Saturday mornings on Radio 4 and slowly inching towards arthritis all these years for nothing, have I? Hello? Is anyone listening? Is this thing even on?] In particular I’ve enjoyed his case studies of trades gone right or wrong, which he has now compiled into a free ebook. You can download it for nada as a PDF via dropbox.

Like these links? Subscribe to get them every week!

  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”.

Offer: Head to RateSetter to earn 4% or more – and a £100 sign-up bonus – or learn more about this offer. Remember investing money with P2P lenders like RateSetter or Zopa involves more risk than with cash savings.

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