April 2024 Best of the Web

Resources reinforce the case for index investing and explore why this proven investment strategy isn’t adopted by more people. We’ll also look at retirement income strategies to pay less taxes over your lifetime and create more guaranteed income.

I close with news of a new book for FIRE enthusiasts, exciting personal news on my journey to gain the CFP® designation, and a resource to help you find good financial advice if you need it.

Underspending In Retirement

Anne Ackerley and Nick Nefouse authored the BlackRock white paper To Spend or Not to Spend? They site research showing that retirees across the wealth spectrum spend less than they could and explore reasons why.

This month I challenged readers to reconsider the way retirement calculators define success and failure. Calculators define success as not running out of money in retirement and failure as running out of money. This framing likely reinforces underspending in retirement.

Justin Fitzpatrick proposes a different framing of retirement calculator results that emphasizes the dual risks of over and under spending in retirement. He writes Reframing Risk In Retirement As “Over- And Under-Spending” To Better Communicate Decisions To Clients, And Finding “Best Guess” Spending Level.

The Case to “Index and Chill”

The annual SPIVA US scorecard comparing active funds to index funds was released. There were no surprises. Actively managed funds underperformed passive in most of the asset classes for the year. Over longer time frames, passive’s dominance over active management becomes undeniable across asset classes.

Do People Actually Just Index and Chill?

I share these studies and others like them frequently. At times I question whether this is necessary or if everyone reading this “gets it” by now. Then I read things like the next resource.

Florida State finance professor Stewart L. Brown recently published a paper titled The Law and Economics of Mutual Fund Fees. In it, Brown sites the following statistic. “In 2021 investors paid almost $90 billion in total fees on about $14 trillion of actively managed mutual funds to an industry flogging a product demonstrably inferior to index funds.”

Meb Faber interviewed Steve Edmundson, the Chief Investment Officer of the Public Employees’ Retirement System. Edmundson shares how he, along with one other individual, manages over $60 billion utilizing a simple, low-cost, indexed approach. This is a refreshing and fascinating listen for those that think, or have been sold on the idea that, you need to get more complicated as your portfolio grows.

Creating Retirement Income

Rob Berger discusses different retirement withdrawal strategies and tools that enable modeling them to optimize your specific situation, writing Tax-Efficient Retirement Withdrawal Strategies to Combat the RMD Tax Tsunami.

Stefan Sharkansky makes a case for The Superiority of TIPS Ladders for retirees who want certainty that they will be able to meet spending obligations.

Allan Roth analyzes a potentially promising new investment product. He writes New LifeX Funds Combine TIPS with Longevity Pooling for High Safe Withdrawal Rates.

My Journey to the CFP®

I’m excited to share that this month I completed my journey to the CFP® designation! I’ve previously written about the education and exam components. Over the past year and a half, I’ve completed the experience and ethics components to complete the process.

New F.I.R.E. Resource

Jackie Cummings Koski is another CFP® who I’ve gotten to know over the past couple of years. Like me, she earned the CFP® designation after achieving financial independence. I’m excited to share that April 30th is the release date for her new book F.I.R.E. for dummies.

It’s cool that F.I.R.E. has penetrated mainstream culture enough to warrant a book in the popular “for dummies” series. Jackie combines personal experience, technical knowledge, and a nonjudgemental voice making her the perfect person to write this book. I encourage you to check it out if you are so inclined.

The Confusing Terminology of Financial Advice

Some of the most frustrating aspects of the CFP® curriculum for me were seeing how they teach the different compensation models and emphasize the term fiduciary.

If you need financial advice, it is vital to understand the massive differences between similar sounding terms like “fee only” and “fee based.” You also need to know that almost everyone in the financial advice industry can and does call themselves fiduciaries, even when they are only paid if you purchase commission based products they sell.

My Abundo colleague Lori Bodenhamer helps you understand these key terms and others that are vital to understand before engaging with any financial professional: Advice-Only Financial Planning Explained!

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