Episode 12 - Retirement & Investment: Facts and Morality

Nota Bene

I am not a financial or tax advisor. Take everything I say with a grain of salt and do your own research and find professionals for additional help.

Facts

Options for retirement

1. 401k

   1. Employer sponsored retirement account

   2. Invest a percentage of salary

   3. Typically involves an employer match of 3%-5% (https://www.fidelity.com/learning-center/smart-money/average-401k-match)

   4. Invest in small set of mutual funds

2. IRA

   1. Individual Retirement Account

   2. Invest your money

   3. Depending on manager can invest in the whole market

      1. Mutual funds, stocks, bonds, options, real estate, infrastructure, etc.

3. Different types of accounts - Traditional vs. Roth (https://investor.vanguard.com/investor-resources-education/iras/roth-vs-traditional-ira)

   1. Tax advantaged accounts with eligibility and contribution requirements.

   2. Traditional

      1.  Deposit pre-tax, withdrawal as income tax

      2. Advantage

         1. Income tax bracket lower in future than today

         2. Can use for a regular expenses

         3. Have more money to invest sooner

   3. Roth

      1. Deposit post-tax, withdrawal tax free

      2. Advantage

         1. Can withdrawal for bigger expenses

         2. Can also be valuable if you expect taxes to go up in the future or to be in a higher bracket

   4. Limitations on when you can withdrawal and have minimum distributions after retirement

4. Other Accounts

   1. Brokerage Account

      1. Can invest in the whole market

      2. No limitations on deposit/withdrawal levels or timing

      3. Involves various capital gains taxes

   2. Various bank accounts

      1. Low profits, but limited risk

Stocks

1. Ownership claim in the company

   1. Includes certain rights to the company

      1. Voting rights at shareholder meeting - offer proposals, vote for directors, etc.

      2. Rights to certain financial information

      3. Limited rights to dividends - especially if board is unjustified in not holding reserves

2. Profits

   1. Can gain cash dividends - there are companies specifically meant to generate dividends.

   2. Some stocks can pay dividends as high as 9%

Bonds

1. Debt obligations against company

   1. As I've argued these are not usurious

   2. Pay a lump sum and receive interest or "coupons" relative to the "face" and at the end of the term receive the face back

   3. Paying for a series of payments

   4. Similar to the medieval census contract

2. Very different rights

   1. Generally don't involve rights over the company like stock

   2. Can include certain obligations

   3. In default, typically a hierarchy of seniority, more senior bonds are paid first while more junior bonds paid after, if nothing left after paying seniors then juniors may get nothing

Mutual Funds

1. Company that invests in a range of different securities

2. Various types of mutual funds

   1. Active/Passive

   2. Stocks/Bonds/Mixed etc.

3. Investing in fund not underlying assets

   1. Investor does not own underlying assets

   2. Investor owns shares in the company itself

4. Voting rights

   1. Stock give you shareholder voting rights

   2. A mutual fund investor doesn't own the shares, so never had the rights

   3. However, some mutual funds are allowing investors a say in voting

Morality

Investment is a moral act and not merely technical

• Need to consider not merely the return but also the morality

Is saving for retirement good?

1. Yes.

   1. Similar to any other future planning we do.

   2. Buy food to save for tomorrow, save money for expenses tomorrow

Benefits of retirement savings

1. Prepare for future expenses

2. Share with family in retirement

3. Provide for living closer to children, supporting children in retirment

Other Moral Considerations

• Vast Range Of companies to invest in

• Money in companies do evil

  •  need to consider moral principles

    • Legitimate Cooperation with Evil Criteria

      • Cooperator’s act must not be intrinsically evil

      • Cooperator is motivated by good intention

      • Cooperator’s reason proportionate to (i) gravity of perpetrator’s wrongdoing and (ii) his proximity to wrongdoing

    • Principle of Double Effect Criteria

      • Act considered independently of evil effect is not intrinsically evil

      • Agent intends good and does not intend evil as an end or as a means

      • Agent has proportionately grave reasons for acting