Thursday Thoughts

An anonymous Tweet said “investing has absolutely nothing to do with investing anymore.... all that time and money spent on graduate school accounting, finance and math credits.... made totally worthless by TikTok and Reddit....damn shame when you think about it.”

Being a shame is one way to think about it but I take this as an upgrade to the challenges posed by participating in markets. One of the great things about capital markets is that you can continue to learn new things for your entire life. Embedded in that sentiment is that success hinges on the ability to adapt to new inputs like whatever the hell is going on with TikTok and Reddit, assessing their relevance or lack thereof and then figure out whether you are better off making changes or maybe recognizing when something is just noise for your investment process. TikTok and Reddit are noise for my process but maybe not yours, there’s no single correct answer for everyone.

If you think things like TikTok and Reddit are noise then the sentiment captured in that Tweet could also be a reinforcement for ergodicity; building a diversified and letting it do its thing for you. If you’re still in the accumulation phase, where will the stock market be 10 years from now? Will it double? Quite possibly. Will it only be up 50%? Also possible. If you make managing your portfolio a full time job for the next ten years how much outperformance will you add versus whatever outcome we get? Statistically speaking, you will underperform. You could just as easily underperform, putting in a fraction of the time realizing that the more important thing will be how much you add to your savings not whether you’re up 80% in a 75% decade.

The Wall Street Journal ran an article titled The Biggest Mistakes People Make With Social Security. Most of the mistakes listed are things you’ve seen before but there was a point at the end from Laurence Klotnikoff that we’ve kind of looked at before and worth exploring further. The book on retirement withdrawals says you should take from taxable accounts first to the point of depletion, then take from traditional IRAs and finally from Roth accounts.

I am huge believer in revisiting conventional thinking for flaws or improvements. Personal side note, I’ve come to believe that conventional thinking on cholesterol is wrong, that all the problems blamed on cholesterol come from sugary diets. Don’t take my word for it, but if you Google it, you’ll find mountains of research and you can draw your own conclusion. I am literally betting my life on this being true. I’ve had high cholesterol my entire adult life but my markers like triglyceride/HDL ratio, calcium heart score and so on are very healthy thank goodness.

Klotnikoff made the argument that taking Social Security will/might kick high earners into a higher tax bracket which argues for taking Social Security at 70 and taking traditional IRA withdrawals in your 60’s which might reduce the size of RMDs starting at 72.

Depending on whether both spouses worked and how much they made, a couple could actually haul in close to $8000/mo from SS at age 70. At age 67 it’d be closer to $6000. There’s potentially a lot of moving parts here but if they can live on $6000/mo and take that from their IRAs, Smart Asset’s tax calculator says they’d owe $5200 in Federal Taxes. If you double that ($6000 from the IRA and $6000 from SS) they’d owe $17,800. Income doubles but taxes triple.

There are too many variables to each person’s/couple’s situation to draw any conclusions, the above is an imperfect example where taking from an IRA in your 60’s, before taking Social Security could make sense. The suggestion here is to dig into your numbers with your accountant.

Finally, @orangebook_ Tweeted “Your habits predict your future.” My reply “Your habits create optionality and resiliency for the future you.”