Insights

Second Quarter 2019|Jim Williams| It is common, particularly in publications directed toward seniors, to see many advertisements of various financial institutions proclaiming the need for "income" from your investment portfolio. While the need for income as broadly defined is fundamental to most retirees, the "income” implied in these ads is usually pretty specific and narrowly defined. Usually these ads contain promotional material for things like fixed income strategies (bonds) or annuities.

First Quarter 2019|Jim Williams| Our tax systems, I’m referring primarily to federal and state income taxes, have gotten ever more complex and will likely continue that track. This is, in part, due to the social choice on taxes, which is to provide incentives for behaviors that are deemed desirable, and disincentives for behaviors that are deemed less desirable. Taxes are also based on the notion of raising revenue, to the extent possible, to fund government operations. History shows that, ironically, there are levels of taxation where increased tax rates reduce government receipts and reduced tax rates increase them. Who knew?

Fourth Quarter 2018|Jim Williams| I recall in a televised interview several years ago, (I think it was Ed Bradley on 60 minutes interviewing George Burns), that Burns told Bradley he found money on the ground every day. Bradley wasn't exactly incredulous but asked the aging and aged actor how that rather unusual personal attribute came to be. Burns with only a slight pause, replied "I look for it." I've scoured the internet without success for corroboration of the exchange. I may have the wrong identities but hang with me; it makes a nice point.

Third Quarter 2019|Jim Williams| One of the most pertinent subjects that we address in the practice of financial planning is lifestyle (level of spending, primarily on consumption). It is of central importance to the planning process since the relationship between spending and resources available is the ultimate key to long-term financial security. At a fundamental level, savings is the difference between what we produce and what we consume; assuming the production is greater than the consumption.

Second Quarter 2018|Jim Williams| In considering claiming strategies for Social Security, one can consider many factors, including other resources, age, age of spouse, level of benefit, spouses own benefits, health, estate desires, tax effects, effects on Medicare Premiums, etc. One of the most common processes is to try to predict one's life span in order to maximize the total benefit over that interval. This method boils down to the following general rule: If you live long, it pays to wait; if you live short, it pays to not wait. Problem is, we don't know, for the most part, whether we will live long or short. Also, other considerations may outweigh simple maximization.

First Quarter 2018|Jim Williams| We've been publishing some pieces on behavioral finance and cognitive biases in recent weeks. This is a look at a laundry list of known biases and priors that affect the financial decisions that individuals make. This is an area of inquiry that has become more prominent in recent years. A recent book, The Undoing Project by Michael Lewis tells the story of two of the pioneers in this research. Daniel Kahneman and Amos Tversky, two Israeli psychologists, who started some 40-odd years ago to identify, evaluate, and document behavioral biases that show up in decision-making. Their work was the inception of Behavioral Finance. Another source in this area is Kahneman’s own book Thinking Fast and Slow. In his book, Kahneman describes much of research that forms the basis of his life’s work. Most interesting, I think, is the tour of the two decision-making systems we all operate with as a part of our original equipment.