Hello and welcome to Allison's ode to the second moment, a newsletter on risk trends and some quirky economics stories
This is the first issue of my newsletter, published April 4, 2016. Every few weeks I'll share my latest work and what others are writing about risk and the economy, with a special focus on retirement.
Can the fiduciary standard make retirement great again?
My thoughts on the Department of Labor's proposed fiduciary standard for financial advisors. While I agree that many consumers deserve better advice and think conflicts are a problem, I am not convinced this is the right answer. It is possible to provide Americans with the retirement security they need, but the finance industry needs more innovation. Any regulation, by definition, conflicts with innovation. But a fiduciary standard (if it's defined the same way it is in ERISA) has the potential to shut down innovation in a space that sorely needs it and it won't improve advice.
Over at Bloomberg View, Matt Levine reports more contention around the fiduciary rule. It's getting ugly.
Maybe it won't, but better a post-retirement spend-down plan certainly would help
On a lighter note, here is something I wrote on managing your airline miles like any other asset. Now that I don't travel so much, I am in decumulation mode. I find it surprisingly difficult after years of saving miles. I have some tips that might also apply to post-retirement spending.
Meanwhile, work income is riskier too
For a long time, the gig economy was the biggest trend that no one could prove was real--until now. Alan Krueger and Larry Katz counted how many gig workers there actually are. And--no surprise their numbers are growing. They now make up almost 16% of workers. But what is a surprise, at least to me, is that almost 40% are college educated and much of the growth is due to Americans older than 55 doing gig work. It may be because more people are using gig work to phase out of the labor force and into retirement.
I am all for a more fluid labor market, but if it means workers have more variable income--that could be a problem. So here's my idea for transitory wage shock insurance for gig workers.
And a few words on nerdiest rivalry on earth
There's a new proposal from House Republicans to help Puerto Rico restructure its debt. The big controversy is over the federal oversight board that will dictate the terms of Puerto Rico's recovery and debt restructuring.
More important, and getting less attention, is that we may get some clarity on who gets paid first--bond holders or pensioners. The Treasury favors the pensioners. Pensioners normally take priority when there's a debt crisis. But the Republicans don't think they should in Puerto Rico. This could get interesting and have far reaching consequences.
But for us pension geeks, the most exciting part of the proposal is the requirement that Puerto Rico use fair value accounting for its pension liabilities!
Financial economists 1
For this round anyway.
But don't get too excited, pension geeks. Puerto Rican pensions have hardly any assets left, and if the numerator of your funding ratio is small, who cares what the denominator is. Still, one step closer toward transparency and retirement security....
Until next time.
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