Wednesday Roundup

Retirees need a third income stream.

That was kind of the point of a John Rekenthaler article at Morningstar. Investors have Social Security and their accumulated savings. The third stream from the article was to annuitize a portion of retirement assets. I didn't take it as a buy annuities article, more like annuitizing has to evolve somehow. This is sort of in line with my thinking. Annuities as we now know them, no. But I've been saying for a while that I do believe the space will evolve. The product suite from Stone Ridge is a step in that direction but I don't feel like those funds are a final solution. 

Being able to get 7 or maybe 8% annually out of some sort of longevity pool has some appeal of course but there will be drawbacks. There's no downside to keeping tabs on how this evolves and then later deciding not for me. 

Stoic retirement planning.

An article about applying stoicism to retirement planning had the following fantastic quote. "Acquiring skill is the most stoic thing you can do because you start by focusing on what you can control." I am equating this to the idea of creating a third income stream in retirement besides annuitizing some portion of your savings. I've written about this hundreds of times probably over the course of almost 20 years of blogging.

If you can monetize a hobby or otherwise cultivate an income from something you enjoy doing, you are relieving some of the income burden off of your investment portfolio. A post retirement side hustle that pays $1000/mo is like having an extra $300,000 in the bank ($12,000/yr would equal a 4% payout on $300,000). Even if your monthly retirement nut is $8000 (way bigger than what mine will be in today's dollars), a $1000 income stream added into the mix is meaningful. 

Start working on this now, don't wait. 

Passive investing will bring down capitalism?

Dave Nadig had an interesting write up about the active versus passive debate. It was a long read with some parts resonating more than others. The one thing missing from the discussion that I always point out as missing from these articles is the use of "passive" funds in very active strategies. Between Twitter and the junk folder in my former work email account, there is no end to active strategies with passive funds. I can't imagine there is a way to accurately quantify this effect. 

Way back when, Cullen Roche said there's no such thing as passive. Even rebalancing is an active decision he said. I generally agree with this thinking. Passive somehow breaking the market is not something I worry about but obviously some sort of legitimate black swan can't be ruled out.

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