The Right Hedge for Retirement

res1114coverMy November column for Research magazine came in the mail today with the rest of a typically fine publication and went live on-line too. Here’s a taste.

The great fear of every retiree is running out of money. Guaranteed income via Social Security, defined benefit plan and annuity contract is by far the safest means to provide retirement income that one can’t outlive. Therefore, prospective retirees with insufficient Social Security and pension income would do well to consider the benefits of hedging their retirement investment risks via annuity contract.

One can readily and reasonably argue about how much guaranteed income a retiree ought to have, the extent of inflation protection that’s necessary and appropriate, how much one should pay for such protection, and how to balance the costs and tradeoffs (particularly relating to control and legacy) that annuities require. These issues require careful analysis and thoughtful consideration by prospective retirees, their families and their advisors.

But one cannot reasonably argue that annuities don’t do precisely what they are designed to do. They provide guaranteed retirement income that one cannot outlive. A retiree with more guaranteed income has less risk of financial disaster than one with less guaranteed income. Economists routinely sing the praises of annuities as does the federal government’s General Accountability Office. Guaranteed income offers retirees the great retirement hedge. Annuities do what they are supposed to do.

I hope you will read the full article as well as the entire magazine.

The Right Hedge for Retirement

Facts (and Minds) are Stubborn Things

When making his defense of some British soldiers during the Boston Massacre trials in December of 1770, John Adams (later the second President of the United States) offered a famous insight. “Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.”  Legal Papers of John Adams, 3:269. In a similar vein, Sen. Daniel Patrick Moynihan once said that “[e]veryone is entitled to his own opinion, but not to his own facts.”

I have often warned about our proclivity to and preference for stories to the exclusion of data (for example, here, here and here). Because stories are so powerful, we want the facts to be neatly packaged into a compelling narrative. Take a look at John Boswell‘s delightful send-up of this technique in the TED context below.


 We crave “wonder, insight [and] ideas.” Facts?  Not so much. Continue reading

When History and Finance Go Wrong

res1014coverMy October column for Research magazine is now available online. Here’s how it opens.

On a fine morning 100 summers ago in Sarajevo, an automobile driver ferrying the Austro-Hungarian Archduke Franz Ferdinand made a wrong turn off the main street into a narrow passageway and came to a stop directly in front of a teenaged activist member of the Serbian terrorist organization Black Hand. Gavrilo Princip drew his pistol and fired twice. The archduke and his wife fell dead. Within hours, World War I was well on its way to seeming inevitable (or at least necessary), all because of a wrong turn. And the idea that history is rational and sheds light on an intelligible story, much less a story of inevitable and inexorable advance, was also shot dead, as dead as the archduke himself.

I hope you’ll read it all.

When History and Finance Go Wrong

What you’re vacillatin’ between

Francis Paschal

Francis Paschal

When I was a first-year law student at Duke many years ago, my Civil Procedure professor was the delightfully named J. Francis Paschal. Professor Paschal seemed to like to portray himself as a bit of a good ol’ boy, with a protruding gut, truly dreadful sports jackets, hair slicked and parted just off-center, and a drawl as thick as molasses on a cold day (if not nearly so sweet). That image could not mask a keen mind and a sharp wit. Nor did it hide his erudition — in addition to his credentials in the law, Professor Paschal had a Princeton Ph.D. too.

The good professor led his classes using the Socratic conventions of the day. A student was called upon to answer a series of penetrating and perplexing questions supposedly designed to ferret out the nuances of some legal principle or another but which, in reality, served to demonstrate to a class full of bright and full-of-themselves college graduates that they were out of the minors and into the intellectual big leagues. If we were going to compete at that level, we needed to up our collective game considerably.

One day fairly early in the first semester Professor Paschal called on a woman in the row ahead of me (who I shall kindly refer to — using a pseudonym since she is now a Deputy Attorney General — as “Frieda Clancy”) and asked a typically impossible question. SInce Frieda was a friend, I happened to know that her extremely difficult predicament was actually utterly impossible because she was not prepared for class.  In fact, it wasn’t just that she wasn’t fully prepared (meaning that she had read the required case, all the cases cited therein, the case comments, casebook notes and citations, relevent hornbook and law review materials and anything else we could think of that might be relevant). She wasn’t prepared at all. She hadn’t even read the case at issue.

This was not likely to turn out well. Continue reading